Module 3: International Business Cycles Flashcards
(16 cards)
Business cycles are:
A) regular and predictable.
B) irregular but predictable.
C) regular but unpredictable.
D) irregular and unpredictable.
E) Neither irregular nor predictable
D) irregular and unpredictable.
Recessions typically, but not always, include at least ______ consecutive quarters of
declining real GDP.
A) two
B) four
C) six
D) eight
E) Twelve.
A) two
Leading economic indicators are:
A) the most popular economic statistics.
B) data that are used to construct the consumer price index and the unemployment rate.
C) variables that tend to fluctuate in advance of the overall economy.
D) standardized statistics compiled by the National Bureau of Economic Research.
E) All of the answers given here are correct.
C) variables that tend to fluctuate in advance of the overall economy.
The long run refers to a period:
A) of decades.
B) during which capital and labor are sometimes not fully employed.
C) during which prices are flexible.
D) during which output deviates from the full-employment level.
E) Five years.
C) during which prices are flexible.
Stabilization policy refers to policy actions aimed at:
A) reducing the severity of short-run economic fluctuations.
B) equalizing incomes of households in the economy.
C) maintaining constant shares of output going to labor and capital.
D) preventing increases in the poverty rate.
E) All of the answers given here are correct.
A) reducing the severity of short-run economic fluctuations.
In the short run an adverse supply shock causes:
A) both prices and output to rise.
B) prices to rise and output to fall.
C) prices to fall and output to rise.
D) both prices and output to fall.
E) output to fall and prices to rise.
B) prices to rise and output to fall.
Most economists prior to Keynes thought:
A) unemployment could be eliminated by an active fiscal policy.
B) full employment was the normal condition.
C) the economy would always adjust to a natural rate of inflation.
D) monetary policy could eliminate the business cycle.
E) government intervention was needed to avoid persistent unemployment.
B) full employment was the normal condition.
The Keynesian AS curve differs from the AS curve of the classical economists,
since Keynes:
A) thought that nominal wages were flexible even when there was unemployment.
B) thought that labour markets worked smoothly to always establish full
employment.
C) described the AS curve as completely vertical.
D) thought that nominal wages were rigid even when there was unemployment.
E) assumed that firms tried to exploit the work force by paying them substandard
wages.
D) thought that nominal wages were rigid even when there was unemployment.
The Keynesian aggregate supply curve implies that:
A) the economy is always at the full-employment level of output.
B) the price level is unaffected by current levels of GDP.
C) wages are perfectly flexible.
D) real money balances decrease as the AD curve shifts to the right.
E) an increase in money supply will not affect the level of real GDP.
B) the price level is unaffected by current levels of GDP.
To maintain a fixed level of aggregate demand the RBA would have to respond
to a tax increase by:
A) increasing reserve requirements.
B) selling foreign currency on the foreign exchange (FOREX) market.
C) buying bonds in the open market.
D) selling bonds in the open market.
E) urging banks to ration credit.
C) buying bonds in the open market.
If the aggregate supply curve can be seen as an adequate description of the
mechanism by which prices rise or fall over time then:
A) fixed prices in the short run mean the aggregate supply curve is horizontal.
B) variable prices in the long run mean the aggregate supply curve is positively
sloped.
C) the vertical long-run aggregate supply curve is a result of the classical quantity
theory of money.
D) All of the answers given here are correct.
E) variable prices in the long run mean the aggregate supply curve is positively
sloped AND the vertical long-run aggregate supply curve is a result of the classical
quantity theory of money.
A) fixed prices in the short run mean the aggregate supply curve is horizontal.
Wages are considered to be sticky rather than flexible because:
A) firms are never willing to pay above market-clearing wages solely to keep workers
motivated.
B) labour contracts contain cost-of-living adjustments.
C. firms tend to look at labour as an expendable resource.
D) firms are unsure about their competitors’ behaviour and only reluctantly
change prices and wages following a change in aggregate demand.
E) All of the answers given here are correct.
D) firms are unsure about their competitors’ behaviour and only reluctantly
change prices and wages following a change in aggregate demand.
The inside lag can be divided into:
A) action and reaction lags.
B) positives and normative components.
C) positive and negative components.
D) recognition, decision and action lags.
E) monetary and fiscal lags.
E) monetary and fiscal lags.
Consider the lags associated with fiscal and monetary policy measures:
A) monetary policy has a longer outside lag than fiscal policy.
B) fiscal policy has a longer inside lag.
C) fiscal policy has a longer decision lag.
D) monetary policy has a shorter implementation lag.
E) All of the answers given here are correct.
E) All of the answers given here are correct.
A sustained increase in the money supply ultimately leads to:
A) hyperinflation.
B) lower inflation.
C) lower nominal interest rates.
D) a higher real money supply.
E) a lower real money supply.
E) a lower real money supply.
Even perfectly anticipated inflation has a cost since:
A) a significant redistribution of wealth may still occur.
B) people spend their money unwisely if inflation increases.
C) debtors always lose some purchasing power even if contracts are indexed.
D) unemployment is bound to increase due to higher real wages.
E) None of the answers given here are correct.
A) a significant redistribution of wealth may still occur.
