ECON 1010 Study Guide - Association To Advance Collegiate Schools Of Business, Loanable Funds, Monetarism

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8 Apr 2014

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Chapter 28 canadian inflation, unemployment, and business cycle. Topic: inflation cycles: demand-pull inflation occurs when, aggregate demand increases, aggregate supply decreases, input costs rise, people incorrectly forecast inflation, unemployment is above the natural rate. Source: study guide: inflation resulting from an increase in aggregate demand is called, cost-push inflation, demand-pull inflation, anticipated inflation, unanticipated inflation, political inflation. Topic: inflation cycles: suppose the economy is in long-run equilibrium when the price of oil rises. Topic: inflation cycles: suppose opec unexpectedly collapses, which leads to a fall in the price of oil. As a result, the price level: rises, and real gdp increases, rises, and real gdp decreases, falls, and real gdp increases, falls, and real gdp decreases, rises, and real gdp remains the same. Source: study guide: cost-push inflation can result from an initial, decrease in personal income taxes, increase in personal income taxes, increase in government expenditure, increase in the money wage rate, increase in transfer payments.

Related Questions

A. A decrease in aggregate supply can result in:

a recession
cost-push inflation
demand-pull inflation
unemployment

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

the price level but reduce real GDP.
real GDP without raising the price level
the price level without affecting real GDP
both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased

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In the money market, money supply is determined by the central bank, such as the Fed in the U.S. Because of this, money supply curve is usually vertical in the short run, while the money demand curve is downward sloping. The quantity demanded of money has an inverse relationship with the interest rate, but a direct relationship with both the price level and real GDP. Therefore, when the general price level increases, what will most likely happen?

		A. The money demand curve will shift to the right.
		B. The money demand curve will shift to the left.
		C. Both the interest rate and investment will rise.
		D. Only A and C.
		E. Only B and C.

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is in the Keynesian range of the aggregate supply curve, then

		A. real GDP will fall and the price level will rise.
		B. real GDP will rise and the price level will fall.
		C. only the real GDP will fall.
		D. only the price level will fall.
		E. both real GDP and the price level will fall.

Which of the following will shift the aggregate demand curve to the left?

		A. The federal government increases spending for highways and bridges.
		B. Consumers expect an economic downturn.
		C. The federal government increases income taxes.
		D. Only A and C.
		E. Only B and C.

Which of the following will shift the aggregate supply curve to the left?

		A. All workers agree to a reduction in wages.
		B. The federal government increases the gasoline taxes.
		C. An improvement in technology raises labor productivity.
		D. Only A and C.
		E. Only B and C

There are also two kinds of deflation, the demand-pull deflation and cost-push deflation. Then which of the following is most likely to be true?

		A. An increase in AD will cause the demand-pull deflation.
		B. An increase in AS (or SRAS) will cause a cost-push deflation.
		C. Economists worry about the demand-pull deflation more than the cost-push deflation.
		D. Only A and C.
		E. Only B and C.

The short-run aggregate supply curve (SRAS) can be written as follows: Y = Yf + b (p - pe), where Y = real GDP, Yf = full-employment real GDP, p = price level, pe = expected price level, and b is a positive coefficient. The SRAS can be re-written as p = pe - (1/b)(Yf) + (1/b)(Y). Then which of the following is true?

		A. An increase in pe will cause a rightward shift of the SRAS curve.
		B. An increase in pe will cause a leftward shift of the SRAS curve.
		C. An increase in Yf will cause a leftward shift of the SRAS curve.
		D. Only A and C.
		E. Only B and C.

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In periods of high inflation,

A) people want to hold as much money as possible
B) the purchasing power of money is decreasing
C) nobody wants to work and earn income
D) low nominal interest rates are likely to result
E) nobody wants to buy goods and services

Which of the following is not an effect of hyperinflation?

A) Price differences among sellers of the same product become larger.
B) People hold on to currency only for very short periods of time.
C) People tend to exchange the currency that is subject to high inflation for a more stable currency.
D) More resources are used efficiently to overcome inflation's effects on transactions costs.
E) Inflation-induced activity that is rational for individuals often has a detrimental effect on the economy as a whole.

Construction workers at times face high rates of unemployment because their work is both seasonal and subject to wide swings over the business cycle.

A) True
B) False

The view that union wage demands may be a source of inflation would be best associated with the

A) supply shock view of inflation
B) demand pull view of inflation
C) cost push view of inflation
D) demand push view of inflation
E) monetary view of inflation

Unemployment rates __________ during contractions and __________ during expansions.

A) rise, fall
B) fall, fall
C) rise, stay the same
D) stay the same, fall
E) fall, rise

The metropolitan with the lowest unemployment rate is

A) Detroit
B) Atlanta
C) San Diego
D) Honolulu
E) Portland

Uncertainty about inflation

A) shifts the attention of business managers away from exchange rate movements and toward concerns about productivity
B) reduces the difficulty of making international business decisions
C) creates uncertainty about the value of the dollar relative to foreign currencies
D) enhances money's importance as a link between the present and the future
E) makes contracts easier to negotiate

Which of the following is not consistent with full employment?

A) an unemployment rate of 5 percent or 6 percent
B) seasonal unemployment
C) structural unemployment
D) cyclical unemployment
E) frictional unemployment

Which of the following groups has historically had the highest unemployment rate?

A) professional workers
B) white teenagers
C) black teenagers
D) black adults
E) white adults

10.

An increase in a person's real wage necessarily means

A) greater purchasing power
B) a lower nominal wage
C) a lower nominal wage after payment of taxes
D) a higher nominal wage
E) a higher nominal wage after payment of taxes

ECON 1010 Study Guide - Association To Advance Collegiate Schools Of Business, Loanable Funds, Monetarism

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