Question 1

Which of the following results in the aggregate demand curve shifting rightward year after year?

Accepted Answer

A)  a one-time increase in government expenditures on goods and services 
B)  inflation 
C)  growth in the quantity of money 
D)  a one-time tax cut

Question 2

Demand-pull inflation results from continually increasing the quantity of money, which leads to a continually

Accepted Answer

A)  decreasing aggregate demand. 
B)  decreasing long-run aggregate supply. 
C)  increasing aggregate supply. 
D)  increasing aggregate demand.

Question 3

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

Accepted Answer

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

Question 4

-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD1, the inflation rate is___________

Accepted Answer

A)  0 percent a year 
B)  More than 20 percent a year 
C)  10 percent a year 
D)  20 percent a year

Question 5

-In the above figure, suppose that the economy currently is at point A. If the inflation rate falls and this fall is unanticipated by the public, the economy moves to a point such as point

Accepted Answer

A)  B. 
B)  D. 
C)  C. 
D)  E.

Question 6

ʺUK Inflation Surges to 16-year Highʺ
According to the story, ʺHigh inflation in July will also lead to ... ʺfurther rises next January ...ʺ Economists also noted that inflation may get worse because the current data did not yet include
ʺannounced rises in gas and electricity prices.ʺ
The story reflects the concept of

Accepted Answer

A)  the long-run Phillips curve. 
B)  demand-pull inflation. 
C)  the short-run Phillips curve. 
D)  cost-push inflation.

Question 7

A Phillips curve shows the relationship between the

Accepted Answer

A)  unemployment rate and real GDP. 
B)  inflation rate and real GDP. 
C)  inflation rate and the unemployment rate. 
D)  price level and real GDP.

Question 8

Demand-pull inflation occurs when

Accepted Answer

A)  the government increases its expenditures. 
B)  aggregate demand increases persistently. 
C)  oil prices increase substantially. 
D)  aggregate supply and aggregate demand decrease persistently.

Question 9

The long-run Phillips curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 10

The main sources of cost-push inflation are increases in

Accepted Answer

A)  aggregate demand and real wage rates. 
B)  real wage rates and the cost of raw materials. 
C)  money wage rates and aggregate demand. 
D)  money wage rates and the cost of raw materials.

Question 11

The factor leading to business cycles in the __________cycle theory is unexpected fluctuations in aggregate demand while in the __________cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.

Accepted Answer

A)  new Keynesian; Keynesian 
B)  new classical; new Keynesian 
C)  monetarist; new Keynesian 
D)  new classical; monetarist

Question 12

The long-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when the

Accepted Answer

A)  real interest rate is zero. 
B)  actual inflation rate equals the expected inflation rate. 
C)  real interest rate equals the nominal interest rate. 
D)  inflation rate is zero.

Question 13

Critics of the real business cycle model argue that

Accepted Answer

A)  investment spending is only weakly related to the real interest rate. 
B)  labor supply is only weakly related to the real interest rate. 
C)  labor supply is very strongly related to the real interest rate. 
D)  investment spending is strongly related to the real interest rate.

Question 14

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

Accepted Answer

A)  Keynesian theory 
B)  real business cycle theory 
C)  new Keynesian theory 
D)  monetarist theory

Question 15

According to real business proponents, in an increase in productivity the demand for loanable funds,_________ the demand for labor, and _________the supply of labor. The real interest rate will _________.

Accepted Answer

A)  increases; increases; increases; rise 
B)  decreases; decreases; decreases; fall 
C)  increases; increases; there is no change in; fall 
D)  increases; increases; there is no change in; rise

Question 16

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

Accepted Answer

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

Question 17

In the new Keynesian business cycle theory, __________can effect real GDP.

Accepted Answer

A)  expected and unexpected changes in aggregate demand 
B)  only unexpected changes in the money wage rate 
C)  only unexpected changes in aggregate demand 
D)  only expected changes in aggregate demand

Question 18

In the real business cycle model, the quantity of money

Accepted Answer

A)  has no effect on real GDP. 
B)  can change the real wage rate. 
C)  can decrease the effect from technology shocks. 
D)  can increase the real interest rate.

Question 19

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

Accepted Answer

A)  labor productivity. 
B)  the money wage rate. 
C)  the real interest rate. 
D)  the real wage rate today but not the real wage rate in the future.

Question 20

Discuss the relationship between the short-run aggregate supply curve and the short-run Phillips curve.

Accepted Answer

The answer of Discuss the relationship between the short-run aggregate...

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