Econ Ch.28

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  1. In the long run, inflation occurs if the ______ grows fast than_______
    • quantity of money
    • potential GDP
  2. An inflation that starts because aggregate demand is increased is called
    demand-pull inflation
  3. Demand-pull inflation can begin with any factor that increases aggregate demand. For example:
    • cut in the interest rate
    • increase in the quantity of money
    • an increase in government expenditure
    • tax cut
  4. In demand-pull inflation, an increas in aggregate demand causes the price level to_____ and real GDP_________
    • rise
    • reamains at potential GDP
  5. An inflation that starts with an increase is costs is called a
    cost-push inflation
  6. There are two main factors that causes prices to increase:
    • An increase in the money wage rate
    • An increase in the money price of raw materials
  7. In cost-push inflation, the initial leftward shift of the short-run aggregate supply curve ends with a/n ________ price level and real GDP______
    • increased
    • remains at potential GDP
  8. The combination of rising inflation and decreasing GDP is called
  9. When the inflation forecast is correct, the economy operates at
  10. When aggregate demand increases, but the increase is expected, so its effect on the price level is expected, this is called
    Expected Inflation
  11. If aggregate demand grows faster than expected, real GDP moves above potential GDP, the inflation rate ___________________________, and the economy behaves like it does in a ______________________.
    • exceeds its expected rate
    • demand-pull inflation
  12. If aggregate demand grows more slowlythan expected, real GDP _____________ potential GDP, the inflation rate ____________, and the economy behaves like it does in a ___________________________.
    • falls below
    • slows
    • cost-push inflation
  13. A Phillips curveis a curve that shows the relationship
    between the inflation rate and the unemployment rate.
  14. The short-run Phillips curve shows the tradeoff between the inflation rate and unemployment rate, holding constant
    • The expected inflation rate
    • the natural unemployement rate
  15. If the inflation rate rises above the expected inflation rate, unemployment..
    falls below its natural rate
  16. If the inflation rate falls below the expected inflation rate, unemployement
    rises above it's natural rate
  17. The long-run Phillips curveshows the relationship between inflation and unemployment when
    The actual inflation rate equals the expected inflation rate
  18. The long-run Phillips curve (LRPC) is _________ at the natural unemployment rate
  19. A change in the natural unemployment rate shifts
    both the LRPCand SRPC
Card Set:
Econ Ch.28
2012-04-28 23:18:17

Macro Final
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