Question 1

Using the monetarist model, place the following events in the order in which they occur in a business cycle.
I. Money wages fall and the SAS curve shifts rightward.
II. The Federal Reserve decreases the growth rate of the quantity of money.
III. The AD curve shifts leftward.

Accepted Answer

According to the monetarist model of the business cycle, changes in the quantity of money are the primary driver of fluctuations in output and prices. Therefore, the first event to occur in the cycle is the Fed decreasing the growth rate of the quantity of money (II), which results in a leftward shift of the AD curve (III). This leads to a reduction in output and prices, and money wages eventually fall (I), causing the SAS curve to shift rightward.

Question 2

-In the above figure, suppose the economy has moved from point A to point C. According to the monetarist theory of the business cycle, what could have caused this movement?

Accepted Answer

According to monetarist theory, a decrease in the growth rate of the quantity of money can lead to a slowdown in economic activity, causing the economy to move from a higher output point (A) to a lower output point (C).

Question 3

-In the above figure, suppose the economy has moved from point D to point B. According to the monetarist theory of the business cycle, what could have caused this movement?

Accepted Answer

According to monetarist theory, an increase in the growth rate of the quantity of money can lead to economic expansion, moving the economy from a lower output point (D) to a higher output point (B).

Question 4

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

Accepted Answer

The monetarist theory emphasizes the role of the quantity of money in determining changes in the economy, particularly in terms of inflation and output. Therefore, changes in real GDP and the quantity of money moving closely together is the most consistent with this theory. The other options are not necessarily specific to the monetarist theory.

Question 5

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to __________and real GDP to__________ .

Accepted Answer

In the monetarist business cycle theory, an increase in the growth rate of the quantity of money leads to a short-run increase in both the price level and real GDP.

Question 6

In monetarist business cycle theory, decreasing the growth rate of the quantity of money__________
And increasing the growth rate of the quantity of money__________ .

Accepted Answer

In monetarist business cycle theory, decreasing the growth rate of the quantity of money causes the economy to enter a recession as there will be less money for businesses to invest and consumers to spend. On the other hand, increasing the growth rate of the quantity of money causes the economy to enter an expansion as there will be more money available for businesses to invest and consumers to spend.

Question 7

The __________cycle theory states that only unexpected fluctuations in aggregate demand are the main source of business cycles.

Accepted Answer

The new classical cycle theory, also known as the Real Business Cycle (RBC) theory, argues that business cycles are primarily the result of real shocks, such as technological changes or changes in the availability of resources, rather than changes in aggregate demand. The theory maintains that individuals and firms respond efficiently and rationally to changes in economic conditions, leading to fluctuations in supply and demand, output, and prices.

Question 8

The new classical theory argues that the primary factor leading to business cycles are

Accepted Answer

The new classical theory emphasizes that unexpected changes in aggregate demand are the primary factor leading to business cycles, as these unexpected changes can lead to deviations from the natural level of output.

Question 9

-Using the above figure, a recession in the monetarist model would start with a

Accepted Answer

In the monetarist model, a recession typically begins with a decrease in aggregate demand, represented by a leftward shift in the AD curve. This shift indicates a reduction in the total demand for goods and services in the economy, leading to lower output and higher unemployment.

Question 10

-In the above figure, suppose the economy starts at point A. The short-run response to a decrease in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

Accepted Answer

The answer of 
-In the above figure, suppose the economy...

Question 11

The new classical cycle theory predicts that an unexpected increase in aggregate demand__________ create a business cycle and an expected increase in aggregate demand__________ create a business cycle.

Accepted Answer

The new classical cycle theory suggests that only unexpected changes in aggregate demand can create business cycles, as expected changes are already accounted for by rational agents.

Question 12

Which of the following is TRUE regarding the monetarist theory of the business cycle?
I. Monetarists assume that the quantity of money increases at a constant rate.
II. Fluctuations in interest rates cause business cycles.
III. Changes in the growth rate of the quantity of money affect aggregate demand.

Accepted Answer

The monetarist theory of the business cycle assumes that changes in the growth rate of the quantity of money affect aggregate demand. It does not necessarily assume that the quantity of money increases at a constant rate, nor does it attribute business cycles solely to fluctuations in interest rates. Therefore, statements I and II are not true, while statement III is true.

Question 13

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

Accepted Answer

Monetarist business cycle theory posits that changes in the growth rate of the quantity of money lead to fluctuations in output and employment. This is because changes in the money supply affect interest rates, which in turn impact investment, consumption, and other economic decisions that drive the business cycle. Therefore, the growth rate of the quantity of money is the most significant factor according to this theory.

Question 14

In monetarist business cycle theory, increases in money growth temporarily__________ real GDP and __________the price level.

Accepted Answer

According to the monetarist business cycle theory, increases in money growth temporarily increase real GDP and raise the price level. This is based on the belief that fluctuations in the money supply are the primary driver of business cycles, and that increasing the money supply leads to increased investment and aggregate demand, which in turn stimulate economic growth. However, this effect is only temporary, as eventually the economy will reach its potential output level and inflationary pressures will build, leading to a rise in prices.

Question 15

-In the above figure, the economy is initially at point A. Which point best represents the short-run response to a decrease in the growth rate of the quantity of money, according to the monetarists?

Accepted Answer

The answer of 
-In the above figure, the economy is...

Question 16

Suppose the growth rate of the quantity of money increased from 5 percent per year to 8 percent per year. According to the__________ , this event would trigger a business cycle expansion.

Accepted Answer

According to the monetarist cycle model, changes in the money supply are the primary driver of business cycles. An increase in the growth rate of the quantity of money would lead to an increase in aggregate demand, leading to a business cycle expansion. The other models listed are not primarily focused on changes in the money supply as a driver of business cycles.

Question 17

Which theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP?

Accepted Answer

The new classical cycle theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP. The theory emphasizes the importance of rational expectations and flexible prices in the economy's response to changes in aggregate demand.

Question 18

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

Accepted Answer

According to the new classical theory of the business cycle, the business cycle impulse refers to unexpected changes in aggregate demand, which can be caused by factors such as shifts in consumer or investor confidence or changes in government spending. These unexpected changes can lead to fluctuations in output, employment, and prices in the short run.

Question 19

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

Accepted Answer

In monetarist business cycle theory, an increase in the growth rate of the quantity of money initially leads to higher aggregate demand, moving the economy from point A to point B in the short run.

Question 20

According to the new classical model, changes in aggregate demand change real GDP

Accepted Answer

In the new classical model, changes in aggregate demand affect real GDP only when they are unexpected, as prices and wages are assumed to be flexible and adjust quickly to expected changes.

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

Using the monetarist model, place the following events in the order in which they occur in a business cycle. I. Money wages fall and the SAS curve shifts rightward. II. The Federal Reserve decreases the growth rate of the quantity of money. III. The AD curve shifts leftward.

-In the above figure, suppose the economy has moved from point A to point C. According to the monetarist theory of the business cycle, what could have caused this movement?

-In the above figure, suppose the economy has moved from point D to point B. According to the monetarist theory of the business cycle, what could have caused this movement?

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

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to and real GDP to .

In monetarist business cycle theory, decreasing the growth rate of the quantity of money And increasing the growth rate of the quantity of money .

The __________cycle theory states that only unexpected fluctuations in aggregate demand are the main source of business cycles.

The new classical theory argues that the primary factor leading to business cycles are

-Using the above figure, a recession in the monetarist model would start with a

-In the above figure, suppose the economy starts at point A. The short-run response to a decrease in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

The new classical cycle theory predicts that an unexpected increase in aggregate demand create a business cycle and an expected increase in aggregate demand create a business cycle.

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

In monetarist business cycle theory, increases in money growth temporarily real GDP and the price level.

-In the above figure, the economy is initially at point A. Which point best represents the short-run response to a decrease in the growth rate of the quantity of money, according to the monetarists?

Suppose the growth rate of the quantity of money increased from 5 percent per year to 8 percent per year. According to the__________ , this event would trigger a business cycle expansion.

Which theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP?

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

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

According to the new classical model, changes in aggregate demand change real GDP

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

Using the monetarist model, place the following events in the order in which they occur in a business cycle. I. Money wages fall and the SAS curve shifts rightward. II. The Federal Reserve decreases the growth rate of the quantity of money. III. The AD curve shifts leftward.

-In the above figure, suppose the economy has moved from point A to point C. According to the monetarist theory of the business cycle, what could have caused this movement?

-In the above figure, suppose the economy has moved from point D to point B. According to the monetarist theory of the business cycle, what could have caused this movement?

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

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to __________and real GDP to__________ .

In monetarist business cycle theory, decreasing the growth rate of the quantity of money__________ And increasing the growth rate of the quantity of money__________ .

The __________cycle theory states that only unexpected fluctuations in aggregate demand are the main source of business cycles.

The new classical theory argues that the primary factor leading to business cycles are

-Using the above figure, a recession in the monetarist model would start with a

-In the above figure, suppose the economy starts at point A. The short-run response to a decrease in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

The new classical cycle theory predicts that an unexpected increase in aggregate demand__________ create a business cycle and an expected increase in aggregate demand__________ create a business cycle.

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

In monetarist business cycle theory, increases in money growth temporarily__________ real GDP and __________the price level.

-In the above figure, the economy is initially at point A. Which point best represents the short-run response to a decrease in the growth rate of the quantity of money, according to the monetarists?

Suppose the growth rate of the quantity of money increased from 5 percent per year to 8 percent per year. According to the__________ , this event would trigger a business cycle expansion.

Which theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP?

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

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

According to the new classical model, changes in aggregate demand change real GDP

-In the above figure, suppose the economy starts at point A. The short-run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to and real GDP to .

In monetarist business cycle theory, decreasing the growth rate of the quantity of money And increasing the growth rate of the quantity of money .

The new classical cycle theory predicts that an unexpected increase in aggregate demand create a business cycle and an expected increase in aggregate demand create a business cycle.

In monetarist business cycle theory, increases in money growth temporarily real GDP and the price level.