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Exam 12: The Business Cycle, Inflation, and Deflation

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Question 111

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According to the real business cycle theory, an increase in the price of a resource (such as oil) , that decreases the demand for loanable funds will ________ employment and ________ real GDP.

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

E) All of the above
F) B) and C)

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Question 112

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-The figure above shows the initial aggregate demand curve, AD?, the initial short-run aggregate supply curve, SAS?, and the long-run aggregate supply curve, LAS. The points in the figure show possible combinations of real GDP and the price level at which the economy of Atlantia is in macroeconomic equilibrium. The economy is initially at point A. Then, the government increases its expenditure on goods and services. Draw the new aggregate demand and short-run aggregate supply curves in the figure to show the effects of this event on Atlantia's real GDP and price level. a)What happens to Atlantia's potential GDP? b)In the short run, what happens to aggregate supply and aggregate demand? c)What are the new short-run equilibrium real GDP and price level? d)In the long run, what happens to the short-run aggregate supply and aggregate demand? e)What are the new long-run equilibrium real GDP and price level?

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a)Atlantia's potential GDP is not affect...

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Question 113

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Cost-push inflation can start with

-Which of the above figures show how inflation can start in an economy?

-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. The money wage rate will

"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 story describes

Which of the following is NOT an aggregate demand, mainstream theory of the business cycle?

Which of the following factors could start a demand-pull inflation ?

-The figure above shows the initial aggregate demand curve, AD?, the initial short-run aggregate supply curve, SAS?, and the long-run aggregate supply curve, LAS. The points in the figure show possible combinations of real GDP and the price level at which the economy of Atlantia is in macroeconomic equilibrium. The economy is initially at point A. Then, Atlantia's oil producers form a price-fixing organization and increase the price of oil. Suppose that potential GDP does not change and that Atlantia's Central Bank responds by increasing the quantity of money. Draw necessary curves in the figure to show the effects of this on Atlantia's real GDP and price level. a)In the short run, what happens to aggregate supply and aggregate demand? b)What are the new short-run equilibrium real GDP and price level? c)In the long run, if Atlantia's continue to hike the price of oil and the Central Bank continues to increase the quantity of money, what happens to aggregate supply and aggregate demand? d)If Atlantia's oil producers continue to hike the price of oil and Atlantia's Central Bank responds by increasing the quantity of money, what process unfolds?

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

By itself, a fall in the price of oil shifts the

What is the impulse in the real business cycle theory of the business cycle?

The early 1990s were the last period of substantial demand-pull inflation in the U.S.

Which of the following leads to a rightward shift in the short-run Phillips curve? I.a reduction in the expected inflation rate II.an increase in the natural unemployment rate

Which of the following could start a demand-pull inflation?

A decrease in the expected inflation rate leads to ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

The business cycle impulse in the new classical theory of the business cycle is

What are sources that can start a demand-pull 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 shifted ________ and the long-run Phillips curve has shifted ________.

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