Exam 12: The Business Cycle, Inflation, and Deflation

In a story from www.Forbes.com (5/30/2003), it was reported that the Chief Technology Officer of the U.S. plans for the country to spend $58.1 billion on technology that year. He was planning to buy technology from Cisco Systems, Oracle and Sun Microsystems in addition to other software makers. This story reports on technological change which is the stressed in the ________ of business cycles.

Which of the following statements about the long-run Phillips curve is CORRECT?

The ________ states that the main source of economic fluctuations is volatile business confidence.

In monetarist business cycle theory, the factor leading to a business cycle is represented by changes in

The Cleveland Federal Reserve Bank's estimate of expected inflation has fallen from 3.5 percent in 2000 to 1.5 percent in 2013. This fall means that

In a real business cycle model, labor supply

The initial factors that can create a cost-push inflation do NOT include

Suppose that an economist finds that real interest rates are extremely high in most recession (which are times when employment is low).. This finding would pose the biggest problem for the

According to real business cycle theory, workers' decisions to work now versus later depend on

-Suppose the natural unemployment rate is 4 percent and the expected inflation rate is 6 percent. In the above figure, illustrate the long-run Phillips curve. What does the long-run Phillips curve reveal about the long-run tradeoff between inflation and unemployment?

When the natural unemployment rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

Using the Phillips curves, what are the short-run and long-run effects of a decrease in the inflation rate?

Business cycle events that arise solely from aggregate demand shifts are emphasized by the

A rational expectation is

How do defenders of the real business cycle theory, (RBC theory)respond to critics of the theory?

Which of the following pieces of evidence is most consistent with the real business cycle theory?

-In the figure above, draw a short-run Phillips curve and a long-run Phillips curve if the expected inflation rate is 4 percent and the natural unemployment rate is 6 percent. Explain how the two change in the short run if: a)slower growth in aggregate demand causes a recession. b)the inflation rate increases. c)the natural unemployment rate increases.

Increases in the quantity of money can start a ________ inflation and an increase in government expenditure can start a ________ inflation.

The government estimates that the natural unemployment rate has increased from 4.8 percent in 2006 to 5.2 percent in late 2012. If these estimates are accurate, the short-run Phillips curve has ________.

Which of the following are TRUE? I.New Keynesian economists believe that money wage rates are influenced by rational expectations of the price level. II.New classical economists believe that money wage rates are influenced by rational expectations of the price level. III.New classical economists believe expected changes in aggregate demand trigger business cycles.