Question 1

In a cost- push inflation,

Accepted Answer

A)  decreases in SAS lead to increases in AD. 
B)  decreases in AD lead to increases in SAS. 
C)  increases in SAS lead to decreases in AD. 
D)  increases in AD lead to increases in SAS.

Question 2

Evidence indicates that a recession occurs at about the same time as a decrease in investment. According to the real business cycle theory, a decrease in investment is attributable to

Accepted Answer

A)  a decline in the growth rate of productivity. 
B)  intertemporal substitution in working decisions. 
C)  a decline in the growth rate of the quantity of money. 
D)  a fall in animal spirits.

Question 3

Which of the following is the factor that leads to business cycles in the monetarist business cycle theory?

Accepted Answer

A)  an unexpected change in aggregate demand 
B)  a change in business confidence 
C)  a change in the growth rate of productivity 
D)  a change by the Fed in the growth rate of the quantity of money

Question 4

A key difference between the new classical and the new Keynesian views of the business cycle is the role played by

Accepted Answer

A)  government expenditures on goods and services. 
B)  the growth rate of the quantity of money. 
C)  unexpected changes in aggregate demand. 
D)  expected changes in aggregate demand.

Question 5

What is the impulse that leads to business cycle in the real business cycle, RBC, theory?

Accepted Answer

The answer of What is the impulse that leads to...

Question 6

According to monetarist theory, the force that starts a recession is a

Accepted Answer

A)  decrease in investment in stocks and bonds. 
B)  decrease in spending money on goods. 
C)  slowdown in the growth rate of the quantity of money. 
D)  fall in interest rates that makes people decrease their saving.

Question 7

Suppose the expected inflation rate is 8 percent and the unemployment rate is 3 percent. If the inflation rate rises to 10 percent and the expected inflation rate does not change,

Accepted Answer

A)  the short- run Phillips curve will shift downward. 
B)  there will be a movement along the short- run Phillips curve. 
C)  the natural unemployment rate will rise. 
D)  the short- run Phillips curve will shift upward.

Question 8

-In the above figure, what might have shifted the short- run Phillips curve from SRPC1 to SRPC2 while leaving the long- run Phillips curve unchanged at LRPC?

Accepted Answer

A)  People's inflationary expectations might have decreased. 
B)  People's inflationary expectations might have increased. 
C)  The natural unemployment rate might have increased. 
D)  The natural unemployment rate might have decreased.

Question 9

If the Fed responds to repeated decreases in the short- run aggregate supply with repeated increases in the quantity of money, the economy will be faced with

Accepted Answer

A)  alternating periods of inflation and deflation. 
B)  continuous inflation. 
C)  steady decreases in real GDP. 
D)  a one- time increase in prices.

Question 10

Suppose the growth rate of the quantity of money increased from 5 percent per year to 8 percent per year. According to the , this event would trigger a business cycle expansion.

Accepted Answer

A)  monetarist cycle model 
B)  Keynesian cycle model 
C)  real business cycle model 
D)  aggregate supply cycle model

Question 11

Define and describe the short- run Phillips curve.

Accepted Answer

The answer of Define and describe the short- run Phillips...

Question 12

The short- run Phillips curve intersects the long- run Phillips curve at the

Accepted Answer

A)  natural interest rate. 
B)  natural inflation rate. 
C)  nominal interest rate. 
D)  expected inflation rate.

Question 13

Moving along a short- run Phillips curve,

Accepted Answer

A)  the price level is constant. 
B)  the expected inflation rate is constant. 
C)  unemployment is constant. 
D)  the inflation rate is constant.

Question 14

What is the factor that leads to business cycles in the new Keynesian cycle theory?

Accepted Answer

The answer of What is the factor that leads to...

Question 15

Which of the following is TRUE regarding the new classical view of the business cycle?

Accepted Answer

A)  Long- term contracts cause the money wage rate to be sticky. 
B)  If firms and workers anticipate an increase in aggregate demand, money wages can be adjusted. 
C)  If firms and workers expect the quantity of money to increase, aggregate demand will decrease. 
D)  Long- term contracts cause business cycles.

Question 16

Stagflation is the combination of a _ _ and _ .

Accepted Answer

A)  fall in the price level; an increase in real GDP 
B)  rise in inflation; a decrease in real GDP 
C)  fall in inflation; an increase in real GDP 
D)  rise in the price level; a decrease in real GDP

Question 17

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. If the quantity of money remains constant, the economy will adjust with

Accepted Answer

A)  aggregate demand shifting back to AD0. 
B)  short- run aggregate supply shifting leftward to SAS1. 
C)  short- run aggregate supply shifting leftward to SAS2. 
D)  aggregate demand shifting to AD2.

Question 18

The long- run Phillips curve shows the relationship between

Accepted Answer

A)  inflation and unemployment when expected inflation does not change. 
B)  the price level and real GDP in the long run. 
C)  inflation and unemployment when expected inflation equals the actual inflation. 
D)  the price level and unemployment in the long run.

Question 19

The real business cycle theory views fluctuations in productivity as the main source of business cycles.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

The answer of Explain how the short- run and long-...

Exam 12: U.S. Inflation, Unemployment, and Business Cycle