Exam 12: The Business Cycle, Inflation, and Deflation

The theory that regards random fluctuations in productivity as the main source of economic fluctuations is the ________ of the business cycle.

Define and describe the short-run Phillips curve.

If the Fed responds to an increase in aggregate demand by increasing the quantity of money

Which of the following is a criticism of the real business cycle theory?

The Keynesian explanation of the business cycle is based on

Suppose that the money prices of raw materials increase so that short-run aggregate supply decreases. If the Federal Reserve does not respond, the higher money price of raw materials will I.repeatedly shift the aggregate demand curve rightward and raise the price level. II.shift the aggregate demand curve rightward and the aggregate supply curve leftward, raising prices. III.result initially in lower employment and a higher price level.

Monetarists believe in changes in animal spirits are the factor that leads to business cycles.

An increase in the expected inflation rate shifts

The short-run Phillips curve

-In the above figure, if people correctly anticipate the increases in aggregate demand and the resulting inflation, the path will be from

"All for One, but None for All" In an article regarding how Great Britain and France are addressing the economic crisis in 2008, Britain's prime minister "is eager to encourage consumer spending" while France's president "wants to boost investment in both the private and public sectors." Both leaders are concerned because "hardly a day goes by without some manufacturing company announcing painful restructuring, plant closures or temporary lay-offs." Www)ft.com, 11/24/2008 If consumption and investment are increased by the governments' policies, we would expect ________ and a ________ the short-run Phillips curve.

-In the above figure, which path represents a cost-push inflation?

Phillips curves show the relationship between the

Stagflation occurs when the price level ________ and real GDP ________.

Suppose velocity increases by 2 percent and potential GDP grows by 2 percent. The trend inflation rate will equal zero if the quantity of money grows by

What are criticisms of the real business cycle theory?

-In the above figure, the economy is at point A. An increase in oil prices occurs. After the increase in oil prices, the Fed responds by increasing the quantity of money. The economy moves from point A to

Compare and contrast the Keynesian and Monetarist business cycle theories.

According to the new Keynesian cycle theory of the business cycle, which of the following can trigger a business cycle expansion? I.an unexpected increase in the quantity of money II.an expected increase in the quantity of money III.an expected increase in government expenditure

"Inflation Gives Saudis Food for Thought" "My boss sent me back to return the milk - it's too expensive," said the Pakistani driver for a middle-class Saudi family at the checkout counter of the Al-Othaim supermarket. ...Saudi Arabia is enjoying an unprecedented economic boom ...as sectors [have] increased activity to meet the big internal demand." Www)ft.com, 1/18/2008 The type of inflation described in the story