Ch. 8 Business Cycles

An increase in government spending on the park system would cause

A. The aggregate demand curve to shift to the right

In the long run, an increase in government purchases of military equipment would cause output to ____ and the aggregate price level to ____.

A. stay constant; rise

Lagging pro-cyclical variables are aggregate economic variables that

B. Reach a peak after coincident variables reach a peak.

Christina Romer's estimates of the business cycles prior to World War II showed that

B. The business cycle had smaller fluctuations before World War II than previously estimated, but still larger fluctuations than after World War II.

The fact that business cycles are periodic but not recurrent means that

B. The business cycle's standard contraction-trough-expansion-peak pattern has been observed to recur over and over again, but not at predictable intervals.

Turning points in business cycles occur when

B. The economy hits the peak or trough in the business cycle.

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, the aggregate demand curve

B. slopes downward

The high point in the business cycle is referred to as the

C. Peak

Business cycles all display the following characteristics EXCEPT

C. Rising prices during an expansion and falling prices during the contraction.

Wars, new inventions, harvest failures, and changes in government policy are examples of what economists refer to as

C. Shocks (either supply shocks or demand shocks)

When the values of coincident, pro cyclical variables are declining, aggregate economic activity

D. is declining.

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, the short-run aggregate supply curve (in absence of misperceptions)

D. is horizontal