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The short-run Phillips curve shows the ________ relationship between ________.


A) negative; unemployment and real GDP
B) positive; unemployment and real GDP
C) negative; inflation and unemployment
D) positive; real GDP and inflation

E) None of the above
F) A) and B)

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Demand-pull inflation could start with


A) an increase in government expenditure followed by an increase in the money wage rate.
B) an increase in the quantity of money followed by a decrease in the money wage rate.
C) a rise in prices of raw materials followed by an increase in the quantity of money.
D) a decrease in exports followed by a decrease in the quantity of money.

E) All of the above
F) A) and D)

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Demand-pull inflation can start when


A) money wage rates rise but the price level does not change.
B) money wage rates rise faster than prices.
C) the short-run aggregate supply curve shifts rightward.
D) the aggregate demand curve shifts rightward.

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

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Which of the following could lead to demand-pull inflation?


A) an increase in the money wage rate
B) an increase in the quantity of money
C) a decrease in exports
D) an increase in oil prices

E) A) and B)
F) B) and C)

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"Shoe Industry under Pressure Amid Rising Costs " Rising costs have forced about 15 per cent of shoe manufacturers in a major south China industrial centre to shut down or relocate in the past year... [the firms have] identified rising wages as a key factor behind the closures and relocations from Dongguan...The problems in the footwear industry reflect broader issues affecting manufacturers across China's Pearl River Delta..." Www) ft.com, 2/26/2008 As the same pressures affect other industries across China, we expect to see


A) demand-pull inflation.
B) a combination of cost-push and demand-pull inflation.
C) cost-push inflation.
D) a downward movement along the short-run Phillips curve.

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

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Which of the following describes the Keynesian approach to the business cycle? I.Unanticipated shocks to aggregate supply drive expansions and recessions. II.The Keynesian theory is a real business cycle model of the economy. III.A decrease in business confidence can trigger a recession.


A) I only
B) III only
C) I and II
D) II and III

E) A) and B)
F) None of the above

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-In the above figure, suppose that the economy is at point A when the quantity of money increases. In the short run, the economy will move to point ________. A) A, that is, the price level and level of real GDP will not change. B) B C) C D) D -In the above figure, suppose that the economy is at point A when the quantity of money increases. In the short run, the economy will move to point ________.


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

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

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The key difference between the new classical theory of the business cycle and the new Keynesian theory of the business cycle is that the new classical theory believes that ________ while the new Keynesian theory believes that ________.


A) expected changes in aggregate demand will change real GDP; expected changes in aggregate demand will not change real GDP
B) only unexpected changes in aggregate demand will change real GDP; only expected changes in aggregate demand will change real GDP
C) only unexpected changes in aggregate demand will change real GDP; both expected and unexpected changes in aggregate demand will change real GDP
D) the short-run aggregate supply curve is horizontal; the short-run aggregate supply curve is vertical

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

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


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

E) B) and D)
F) B) and C)

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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, 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 takes no action. 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 aggregate supply and aggregate demand? b)What are the new equilibrium real GDP and price level? c)Will the rise in the price of oil lead to inflation in Atlantia? Why or why not? -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 takes no action. 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 aggregate supply and aggregate demand? b)What are the new equilibrium real GDP and price level? c)Will the rise in the price of oil lead to inflation in Atlantia? Why or why not?

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a)See the figure above. The increase i...

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


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

E) A) and B)
F) A) and D)

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A demand-pull inflation occurred in the United States during most of the later part of the


A) 1960s.
B) 2000s.
C) 1980s.
D) 1990s.

E) None of the above
F) B) and C)

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


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

E) C) and D)
F) A) and C)

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In the Keynesian business cycle theory, business cycles begin with changes in


A) inflation expectations.
B) consumer sentiment.
C) business confidence.
D) the public's expectations about Fed policies.

E) B) and C)
F) A) and B)

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Cost-push inflation starts with


A) an increase in aggregate demand.
B) a decrease in aggregate demand.
C) an increase in short-run aggregate supply.
D) a decrease in short-run aggregate supply.

E) A) and C)
F) B) and D)

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To prevent demand-pull inflation


A) firms must refuse to increase wages.
B) the Fed must not let the quantity of money persistently rise.
C) the natural unemployment rate must increase.
D) real GDP must increase.

E) None of the above
F) A) and B)

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-In the above figure, which of the following curves represents the long-run Phillips curve? A) 1 B) 2 C) 3 D) 4 -In the above figure, which of the following curves represents the long-run Phillips curve?


A) 1
B) 2
C) 3
D) 4

E) A) and C)
F) None of the above

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The Keynesian explanation of the business cycle rests on several concepts, including


A) rigid money wage rates.
B) unstable monetary policy by the Fed.
C) shocks to the rate of technological change.
D) the desire of politicians to be re-elected.

E) A) and C)
F) C) and D)

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Suppose that last year the economy of Suffera was experiencing an expected inflation rate of 8 percent and unemployment rate of 12 percent. An unexpected increase in the inflation rate would


A) increase the unemployment rate.
B) increase the inflation rate and decrease the unemployment rate.
C) increase the inflation rate but have no effect on the unemployment rate.
D) None of the above answers is correct.

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

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For an economy at full employment, an increase in the quantity of money will lead to which of the following sequences of shifts in aggregate demand and supply curves?


A) decreased aggregate demand, increased short-run aggregate supply, constant long-run aggregate supply
B) decreased aggregate demand, decreased short-run aggregate supply, decreased long-run aggregate supply
C) increased aggregate demand, increased short-run aggregate supply, increased long-run aggregate supply
D) increased aggregate demand, decreased short-run aggregate supply, constant long-run aggregate supply

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

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