Question 1

Stagflation is characterized by

Accepted Answer

A)   an increase in both output and the price level.
B)   a decrease in output and the price level.
C)   an increase in the unemployment rate and an increase in the price level.
D)   an economy which is growing at a rate equal to its historical average growth rate.

Question 2

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

Accepted Answer

A)   Keynesian and real business cycle theories.
B)   monetarist and real business cycle theories.
C)   Keynesian and monetarist cycle theories.
D)   none of the major theories

Question 3

Which of the following correctly describes the new classical cycle theory of the business cycle?

Accepted Answer

A)   An unexpected change in the quantity of money can trigger a business cycle.
B)   An expected tax rate change can trigger a business cycle.
C)   An expected change in the level of exports can trigger a business cycle.
D)   Rational expectations keep the money wage from changing quickly.

Question 4

In real business cycle theory,a decrease in productivity leads to all of the following events EXCEPT ________.

Accepted Answer

A)   a decrease in the demand for labor
B)   a decrease in investment demand
C)   a rise in the real wage rate
D)   a fall in the real interest rate

Question 5

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect bec...

Question 6

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

Question 7

-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.

Accepted Answer

The figure with the Phillips curves is...

Question 8

If Samantha predicts future inflation based on rational expectations,then

Accepted Answer

A)   her forecast of inflation will always be correct.
B)   she uses all relevant information to forecast inflation.
C)   she looks only to the past to help her predict future inflation.
D)   she never under estimates inflation.

Question 9

"Inflation Gives Saudis Food for Thought" "My boss sent me back to return the milk - it's too expensive," said the Pakistani driver for a middle-class Saudi family at the checkout counter of the Al-Othaim supermarket....Saudi Arabia is enjoying an unprecedented economic boom ...as sectors [have] increased activity to meet the big internal demand." www.ft.com,1/18/2008
The type of inflation described in the story

Accepted Answer

A)   begins with stagflation.
B)   starts with an increase in aggregate demand.
C)   is the result of money wage rate spiral.
D)   starts with a decrease in aggregate demand.

Question 10

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

Accepted Answer

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

Question 11

If people correctly anticipate an increase in aggregate demand,a result is

Accepted Answer

A)   an increase in the real value of outstanding government debt.
B)   workers demanding higher money wages to keep the real wage unchanged.
C)   a lower rate of inflation in the current time period.
D)   there are no predictable results associated with an anticipated increase in aggregate demand.

Question 12

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

Accepted Answer

A)   consumer spending.
B)   investment spending.
C)   the growth rate of the quantity of money.
D)   net exports.

Question 13

A criticism of the real business cycle (RBC)  theory is that

Accepted Answer

A)   the money wage rate is flexible.
B)   potential GDP does not vary with changes in the quantity of money.
C)   productivity fluctuations might be caused by the business cycle.
D)   All of the above answers are correct.

Question 14

Fluctuations in business confidence is the factor leading to business cycles in the ________.

Accepted Answer

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

Question 15

-In the above figure,suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods.In the short run,this change creates a movement to point ________ and an eventual increase in ________.

Accepted Answer

A)   B; money wage rates
B)   D; the natural unemployment rate
C)   B; the natural unemployment rate
D)   D; money wage rates

Question 16

The factor leading to business cycles according to the real business cycle theory is changes in

Accepted Answer

A)   the growth rate of the quantity of money.
B)   technological change caused by changes in productivity.
C)   productivity caused by changes in technology.
D)   investment caused by changes in business confidence.

Question 17

Along the long-run Phillips curve,

Accepted Answer

A)   actual inflation is greater than expected inflation.
B)   actual inflation is equal to expected inflation.
C)   actual inflation is less than expected inflation.
D)   None of the above answers is correct.

Question 18

According to the real business cycle theory,technological change

Accepted Answer

A)   always increases productivity.
B)   never increases productivity.
C)   can initially decrease productivity.
D)   is caused by changes in productivity.

Question 19

A rational expectation of inflation is

Accepted Answer

A)   how economists make perfect forecasts of inflation.
B)   how unexpected inflation affects the economy.
C)   why unexpected inflation redistributes income.
D)   a forecast of inflation that uses all relevant information.

Question 20

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.

Accepted Answer

A)   only I
B)   only II
C)   both I and II
D)   neither I nor II

Exam 12: Inflation, Jobs, and the Business Cycle

Fluctuations in business confidence is the factor leading to business cycles in the ________.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The figure with the Phillips curves is...
View Answer

Which of the following correctly describes the new classical cycle theory of the business cycle?

Correct Answer
verified

Correct Answer
verified

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.

Correct Answer
verified

-In the above figure,suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods.In the short run,this change creates a movement to point and an eventual increase in .

Correct Answer
verified

A criticism of the real business cycle (RBC) theory is that

Correct Answer
verified

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

Correct Answer
verified

If people correctly anticipate an increase in aggregate demand,a result is

Correct Answer
verified

If Samantha predicts future inflation based on rational expectations,then

Correct Answer
verified

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

Correct Answer
verified

According to the real business cycle theory,technological change

Correct Answer
verified

The factor leading to business cycles according to the real business cycle theory is changes in

Correct Answer
verified

In real business cycle theory,a decrease in productivity leads to all of the following events EXCEPT ________.

Correct Answer
verified

A rational expectation of inflation is

Correct Answer
verified

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

Correct Answer
verified
The statement is incorrect bec...
View Answer

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

Correct Answer
verified

Stagflation is characterized by

Correct Answer
verified

Along the long-run Phillips curve,

Correct Answer
verified

Exam 12: Inflation, Jobs, and the Business Cycle

Fluctuations in business confidence is the factor leading to business cycles in the ________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified The figure with the Phillips curves is...View AnswerShow Answer

Which of the following correctly describes the new classical cycle theory of the business cycle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

-In the above figure,suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods.In the short run,this change creates a movement to point ________ and an eventual increase in ________.

Correct AnswerverifiedShow Answer

A criticism of the real business cycle (RBC) theory is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If people correctly anticipate an increase in aggregate demand,a result is

Correct AnswerverifiedShow Answer

If Samantha predicts future inflation based on rational expectations,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the real business cycle theory,technological change

Correct AnswerverifiedShow Answer

The factor leading to business cycles according to the real business cycle theory is changes in

Correct AnswerverifiedShow Answer

In real business cycle theory,a decrease in productivity leads to all of the following events EXCEPT ________.

Correct AnswerverifiedShow Answer

A rational expectation of inflation is

Correct AnswerverifiedShow Answer

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?

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

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

Correct AnswerverifiedShow Answer

Stagflation is characterized by

Correct AnswerverifiedShow Answer

Along the long-run Phillips curve,

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

The figure with the Phillips curves is...
View Answer

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Correct Answer
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-In the above figure,suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods.In the short run,this change creates a movement to point and an eventual increase in .

Correct Answer
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Correct Answer
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The statement is incorrect bec...
View Answer

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Correct Answer
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