Exam 12: The Business Cycle, Inflation, and Deflation

What is the Phillips curve? Discuss both the short-run and long-run Phillips curve.

By itself, an increase in aggregate demand increases GDP by the least amount in the ________.

The short-run Phillips curve shows a

Explain how the short-run and long-run Phillips curves are related.

A Phillips curve shows the relationship between the

In a demand-pull inflation, if the Fed stops expanding the quantity of money

The intertemporal substitution effect is the factor that creates business cycles in the Keynesian theory of the business cycle.

Suppose velocity increases by 2 percent and potential GDP grows by 4 percent. The trend inflation rate will equal zero if the quantity of money grows by

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to ________ and real GDP to ________.

At the start of a cost-push inflation

The new classical cycle theory predicts that an unexpected increase in aggregate demand ________ create a business cycle and an expected increase in aggregate demand ________ create a business cycle.

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP

The short-run Phillips curve is vertical at the natural unemployment rate.

The economy is at potential GDP when people correctly anticipate an increase in government expenditure on goods and services. If the money wage rate adjusts immediately, then

When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of business cycle fluctuations?

-In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will

According to the real business cycle (RBC)theory, during a recession the demand for labor ________ and the supply of labor ________.

A decrease in the natural unemployment rate shifts the long-run Phillips curve ________ and ________ the short-run Phillips curve.

A leftward shift in the short run aggregate supply curve

In real business cycle models, in order to increase real GDP after a negative technology shock, the government can I.increase the quantity of money. II.decrease the quantity of money.