Question 1

The factor that leads to business cycle events within real business cycle theory is

Accepted Answer

A)   adverse shocks to international trade.
B)   changes in growth rate in productivity.
C)   changes in the growth rate in the quantity of money.
D)   changes in expected future sales and profits of firms.

Question 2

When the AD and SAS curves intersect at a level of real GDP which exceeds potential GDP and there is no government policy undertaken, which of the following will occur?

Accepted Answer

A)   The AD curve shifts leftward because the money wage rate rises.
B)   The AD curve shifts rightward because the Fed decreases the money supply.
C)   The SAS curve shifts leftward because the money wage rate rises.
D)   The AS curve shifts leftward because the money wage rate falls.

Question 3

Suppose that managers forecasted a large decline in expected sales and profits and so their confidence plummets. According to the __________, this forecast might start a business cycle.

Accepted Answer

A)   circular flow theory
B)   Keynesian cycle theory
C)   monetarist cycle theory
D)   new classical cycle theory

Question 4

ʺThe long-run Phillips curve is vertical at the expected inflation rate.ʺ Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect bec...

Question 5

Increases in government expenditure can create cost-push inflation.)

Accepted Answer

A) True 
 B)False

Question 6

-In the above figure, if the economy moves from point A to point E,

Accepted Answer

A)   money wage rates have increased.
B)   there may have been demand-pull inflation.
C)   there has been economic growth.
D)   Both answers A and B are correct.

Question 7

-The figure above shows an economyʹs Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is___________ percent and the expected inflation rate is___________ Percent a year.

Accepted Answer

A)   6; 6
B)   6; 4
C)   4; 6
D)   6; 10

Question 8

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

Accepted Answer

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

Question 9

When the price level is rising and simultaneously real GDP is decreasing,

Accepted Answer

A)   stagflation occurs.
B)   the Fed has increased the discount rate.
C)   there is an expansionary gap.
D)   the natural unemployment rate increases.

Question 10

When there is a cost-push inflation,

Accepted Answer

A)   workers demand higher money wages because of the inflation.
B)   the aggregate demand curve shifts leftward because of the cost hikes.
C)   the short-run aggregate supply curve shifts rightward.
D)   None of the above answers is correct.

Question 11

Which of the following is  NOT  a potential start of a demand-pull inflation?

Accepted Answer

A)   an increase in government expenditure
B)   an increase in the quantity of money
C)   an increase in exports
D)   an increase in the money wage rate

Question 12

Keynesians believe that

Accepted Answer

A)   the economy will normally operate at full employment.
B)   aggregate demand changes tend to induce aggregate supply changes, offsetting any effect from changes in government expenditures.
C)   a change in business confidence can affect the amount of investment in the economy.
D)   money wage rate adjustments will quickly eliminate unemployment.

Question 13

For a given level of anticipated inflation and natural unemployment rate, the short -run Phillips curve shows the relationship between

Accepted Answer

A)   potential GDP and real GDP.
B)   inflation and money growth.
C)   real GDP growth and the unemployment rate.
D)   inflation and the unemployment rate.

Question 14

To stop a demand-pull inflation using monetary policy, you would recommend that the Fed

Accepted Answer

A)   increase the quantity of money.
B)   not increase the quantity of money.
C)   purchase government bonds in the open market.
D)   increase tax rates.

Question 15

Cost-push inflation might initially result from

Accepted Answer

A)   an increase in government expenditure.
B)   an increase in the cost of resources.
C)   the use of new technology.
D)   an increase in the quantity of money.

Question 16

At the start of a cost-push inflation,

Accepted Answer

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

Question 17

-In the above figure, the economy is initially at point A. If workers and firms correctly anticipate the increase in aggregate demand and the resulting inflation rate, the economy will move to point

Accepted Answer

A)   A, that is, the price level and level of real GDP will not change.
B)   B.
C)   C.
D)   D.

Question 18

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same, ___________.

Accepted Answer

A)   real GDP remains at potential GDP
B)   real GDP decreases below potential GDP
C)   long-run aggregate supply decreases
D)   real GDP increases above potential GDP

Question 19

Which of the following pieces of evidence is most consistent with the monetarist theory?

Accepted Answer

A)   Productivity and GDP move closely together.
B)   Changes in real GDP and the quantity of money move closely together.
C)   Labor supply decisions do not seem to depend on real interest rates.
D)   Money wage rates take some time to adjust to price changes.

Question 20

In a demand-pull inflation, the AD curve shifts___________ and the SAS curve shifts___________ .

Accepted Answer

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

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

-In the above figure, the economy is initially at point A. If workers and firms correctly anticipate the increase in aggregate demand and the resulting inflation rate, the economy will move to point

Correct AnswerverifiedShow Answer

Which of the following is NOT a potential start of a demand-pull inflation?

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Keynesians believe that

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When the price level is rising and simultaneously real GDP is decreasing,

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At the start of a cost-push inflation,

Correct AnswerverifiedShow Answer

Increases in government expenditure can create cost-push inflation.)

Correct AnswerverifiedShow Answer

When the AD and SAS curves intersect at a level of real GDP which exceeds potential GDP and there is no government policy undertaken, which of the following will occur?

Correct AnswerverifiedShow Answer

Suppose that managers forecasted a large decline in expected sales and profits and so their confidence plummets. According to the __________, this forecast might start a business cycle.

Correct AnswerverifiedShow Answer

Cost-push inflation might initially result from

Correct AnswerverifiedShow Answer

Which of the following pieces of evidence is most consistent with the monetarist theory?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The factor that leads to business cycle events within real business cycle theory is

Correct AnswerverifiedShow Answer

-In the above figure, if the economy moves from point A to point E,

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-The figure above shows an economyʹs Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is___________ percent and the expected inflation rate is___________ Percent a year.

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ʺThe long-run Phillips curve is vertical at the expected inflation rate.ʺ Is the previous statement correct or incorrect?

Correct AnswerverifiedThe statement is incorrect bec...View AnswerShow Answer

To stop a demand-pull inflation using monetary policy, you would recommend that the Fed

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Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same, ___________.

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For a given level of anticipated inflation and natural unemployment rate, the short -run Phillips curve shows the relationship between

Correct AnswerverifiedShow Answer

When there is a cost-push inflation,

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In a demand-pull inflation, the AD curve shifts___________ and the SAS curve shifts___________ .

Correct AnswerverifiedShow Answer

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-The figure above shows an economyʹs Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is_ percent and the expected inflation rate is_ Percent a year.

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The statement is incorrect bec...
View Answer

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In a demand-pull inflation, the AD curve shifts_ and the SAS curve shifts_ .

Correct Answer
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