Question 1

The short-run Phillips curve intersects the long-run Phillips curve at the actual inflation rate.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing

Accepted Answer

A)  the economy will experience a temporary reduction in employment but will eventually return to full employment. 
B)  output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level. 
C)  the short-run aggregate supply curve will not shift leftward and there will be continued inflation. 
D)  eventually the short-run aggregate supply curve will shift leftward and there will be continued inflation. 
A)  the economy will experience a temporary reduction in employment but will eventually return to full employment. 
B)  output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level. 
C)  the short-run aggregate supply curve will not shift leftward and there will be continued inflation. 
D)  eventually the short-run aggregate supply curve will shift leftward and there will be continued inflation.

Question 3

During a deflation, the inflation rate is

Accepted Answer

A)  negative. 
B)  positive and rising. 
C)  positive and falling. 
D)  positive and not changing. 
A)  negative. 
B)  positive and rising. 
C)  positive and falling. 
D)  positive and not changing.

Question 4

Demand-pull inflation starts as the

Accepted Answer

A)  LAS curve shifts leftward. 
B)  LAS curve shifts rightward. 
C)  AD curve shifts rightward. 
D)  AD curve shifts leftward. 
A)  LAS curve shifts leftward. 
B)  LAS curve shifts rightward. 
C)  AD curve shifts rightward. 
D)  AD curve shifts leftward.

Question 5

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect bec

Question 6

For a cost-push inflation to occur, oil price increases must be accompanied by

Accepted Answer

A)  decreased investment spending. 
B)  lower personal tax rates. 
C)  increases in the quantity of money. 
D)  increases in government expenditures. 
A)  decreased investment spending. 
B)  lower personal tax rates. 
C)  increases in the quantity of money. 
D)  increases in government expenditures.

Question 7

Over the last several years, the money supply in Indonesia as increased by 9 percent in 2003 to 14 percent in 2005 and 23 percent in 2007. At the same time, real GDP has grown steadily at over 4 percent annually.
These changes would be shown as
I.rightward shifts of the AD curve
II.a movement down along the short-run Phillips curve
III.rightward shifts of the LAS curve

Accepted Answer

A)  I and III. 
B)  I, II and III. 
C)  II only. 
D)  I only. 
A)  I and III. 
B)  I, II and III. 
C)  II only. 
D)  I only.

Question 8

A one-time increase in the price of oil followed by a one-time increase in aggregate demand produce

Accepted Answer

A)  continuing cost-push inflation. 
B)  continuing demand-pull inflation. 
C)  a one-time decrease in the price level. 
D)  a one-time increase in the price level. 
A)  continuing cost-push inflation. 
B)  continuing demand-pull inflation. 
C)  a one-time decrease in the price level. 
D)  a one-time increase in the price level.

Question 9

During a cost-push inflation spiral, the money wage rate ________ and the quantity of money ________.

Accepted Answer

A)  increases; increases 
B)  increases; does not change 
C)  does not change; increases 
D)  does not change; does not change 
A)  increases; increases 
B)  increases; does not change 
C)  does not change; increases 
D)  does not change; does not change

Question 10

The ________ theory of the business cycle asserts that expected and unexpected changes in aggregate demand lead to fluctuations in real GDP.

Accepted Answer

A)  real business cycle 
B)  new classical cycle 
C)  new Keynesian cycle 
D)  None of the above answers are correct. 
A)  real business cycle 
B)  new classical cycle 
C)  new Keynesian cycle 
D)  None of the above answers are correct.

Question 11

If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

Accepted Answer

A)  SAS curve shifts rightward. 
B)  LAS curve shifts rightward. 
C)  SAS curve shifts leftward. 
D)  LAS curve shifts leftward. 
A)  SAS curve shifts rightward. 
B)  LAS curve shifts rightward. 
C)  SAS curve shifts leftward. 
D)  LAS curve shifts leftward.

Question 12

At the start of a cost-push inflation

Accepted Answer

A)  productivity rises. 
B)  real GDP increases faster than the quantity of money. 
C)  the short-run aggregate supply curve shifts rightward. 
D)  prices and unemployment are rising. 
A)  productivity rises. 
B)  real GDP increases faster than the quantity of money. 
C)  the short-run aggregate supply curve shifts rightward. 
D)  prices and unemployment are rising.

Question 13

A demand-pull inflation consists of ________ shifts in the AD curve and ________ shifts in the SAS curve.

Accepted Answer

A)  rightward; rightward 
B)  rightward; leftward 
C)  leftward; rightward 
D)  leftward; leftward 
A)  rightward; rightward 
B)  rightward; leftward 
C)  leftward; rightward 
D)  leftward; leftward

Question 14

The Cleveland Federal Reserve Bank's estimate of expected inflation in 2013 is 1.5 percent. In 2013, if aggregate demand grows faster than expected, the actual inflation rate will

Accepted Answer

A)  exceed 1.5 percent. 
B)  equal 1.5 percent because the actual inflation rate must equal the expected inflation rate. 
C)  be less than 1.5 percent. 
D)  None of the above answers are correct because there is no relationship between the actual inflation rate and aggregate demand. 
A)  exceed 1.5 percent. 
B)  equal 1.5 percent because the actual inflation rate must equal the expected inflation rate. 
C)  be less than 1.5 percent. 
D)  None of the above answers are correct because there is no relationship between the actual inflation rate and aggregate demand.

Question 15

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

Accepted Answer

A)  raise; increase 
B)  raise; decrease 
C)  lower; increase 
D)  lower; decrease 
A)  raise; increase 
B)  raise; decrease 
C)  lower; increase 
D)  lower; decrease

Question 16

A larger than expected increase in aggregate demand will lead to ________ in the ________ of the business cycle.

Accepted Answer

A)  a recession; new Keynesian cycle theory 
B)  a recession; Keynesian cycle theory 
C)  an expansion; new classical cycle theory 
D)  an expansion; real business cycle theory 
A)  a recession; new Keynesian cycle theory 
B)  a recession; Keynesian cycle theory 
C)  an expansion; new classical cycle theory 
D)  an expansion; real business cycle theory

Question 17

The factor leading to business cycles according to the real business cycle theory is changes in

Accepted Answer

A)  the growth rate of the quantity of money. 
B)  technological change caused by changes in productivity. 
C)  productivity caused by changes in technology. 
D)  investment caused by changes in business confidence. 
A)  the growth rate of the quantity of money. 
B)  technological change caused by changes in productivity. 
C)  productivity caused by changes in technology. 
D)  investment caused by changes in business confidence.

Question 18

Keynes used the term "animal spirits" to represent

Accepted Answer

A)  changes in people's consumption expenditures. 
B)  the ease of forecasting. 
C)  fluctuations in business confidence. 
D)  investment based on hard facts about the future. 
A)  changes in people's consumption expenditures. 
B)  the ease of forecasting. 
C)  fluctuations in business confidence. 
D)  investment based on hard facts about the future.

Question 19

An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long-run equilibrium with

Accepted Answer

A)  a higher price level but the same real GDP. 
B)  a higher price level and an increased level of real GDP. 
C)  the same price level and a lower level of real GDP. 
D)  None of the above answers are correct. 
A)  a higher price level but the same real GDP. 
B)  a higher price level and an increased level of real GDP. 
C)  the same price level and a lower level of real GDP. 
D)  None of the above answers are correct.

Question 20

Which of the following CORRECTLY describes the new classical cycle theory of the business cycle?

Accepted Answer

A)  An unexpected change in the quantity of money can trigger a business cycle. 
B)  An expected tax rate change can trigger a business cycle. 
C)  An unexpected change in the price of oil can trigger a business cycle. 
D)  Rational expectations keep the money wage from changing quickly. 
A)  An unexpected change in the quantity of money can trigger a business cycle. 
B)  An expected tax rate change can trigger a business cycle. 
C)  An unexpected change in the price of oil can trigger a business cycle. 
D)  Rational expectations keep the money wage from changing quickly.

The short-run Phillips curve intersects the long-run Phillips curve at the actual inflation rate.

Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing

During a deflation, the inflation rate is

Demand-pull inflation starts as the

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

For a cost-push inflation to occur, oil price increases must be accompanied by

A one-time increase in the price of oil followed by a one-time increase in aggregate demand produce

During a cost-push inflation spiral, the money wage rate and the quantity of money .

The ________ theory of the business cycle asserts that expected and unexpected changes in aggregate demand lead to fluctuations in real GDP.

If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

At the start of a cost-push inflation

A demand-pull inflation consists of shifts in the AD curve and shifts in the SAS curve.

The Cleveland Federal Reserve Bank's estimate of expected inflation in 2013 is 1.5 percent. In 2013, if aggregate demand grows faster than expected, the actual inflation rate will

In the short-run, an increase in the price of raw materials will the price level and real GDP.

A larger than expected increase in aggregate demand will lead to in the of the business cycle.

The factor leading to business cycles according to the real business cycle theory is changes in

Keynes used the term "animal spirits" to represent

An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long-run equilibrium with

Which of the following CORRECTLY describes the new classical cycle theory of the business cycle?

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 12: The Business Cycle, Inflation, and Deflation

The short-run Phillips curve intersects the long-run Phillips curve at the actual inflation rate.

Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing

During a deflation, the inflation rate is

Demand-pull inflation starts as the

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

For a cost-push inflation to occur, oil price increases must be accompanied by

A one-time increase in the price of oil followed by a one-time increase in aggregate demand produce

During a cost-push inflation spiral, the money wage rate ________ and the quantity of money ________.

The ________ theory of the business cycle asserts that expected and unexpected changes in aggregate demand lead to fluctuations in real GDP.

If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

At the start of a cost-push inflation

A demand-pull inflation consists of ________ shifts in the AD curve and ________ shifts in the SAS curve.

The Cleveland Federal Reserve Bank's estimate of expected inflation in 2013 is 1.5 percent. In 2013, if aggregate demand grows faster than expected, the actual inflation rate will

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

A larger than expected increase in aggregate demand will lead to ________ in the ________ of the business cycle.

The factor leading to business cycles according to the real business cycle theory is changes in

Keynes used the term "animal spirits" to represent

An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long-run equilibrium with

Which of the following CORRECTLY describes the new classical cycle theory of the business cycle?

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

During a cost-push inflation spiral, the money wage rate and the quantity of money .

A demand-pull inflation consists of shifts in the AD curve and shifts in the SAS curve.

In the short-run, an increase in the price of raw materials will the price level and real GDP.

A larger than expected increase in aggregate demand will lead to in the of the business cycle.