The economy functions as if it __________________.

swings to and fro like a rocking horse
cycles like the earth from day into night
is hit by shocks, cycles indefinitely, or cycles in swings until another shock appears
cycles like a tennis ball that is hit by a tennis racket

The _______ states that the main source of economic fluctuations is volatile expectations.

Keynesian theory of the business cycle
AS-AD theory of the business cycle
real business cycle theory
monetarist theory of the business cycle

A Keynesian expansion begins when a rise in animal spirits _______________________.

increases long-run aggregate supply
increases short-run aggregate supply
decreases aggregate demand
increases aggregate demand

The monetarist theory of the business cycle regards the impulse of the business cycle as _____________.

the unanticipated increase in aggregate demand
volatility in the interest rate
volatility in the demand for money
the growth rate of the quantity of money

Maureen forecasts that the economy will enter a recession in 2004. Her forecast is based on all the relevant information that is available. Maureen's forecast is a ___________________.

rational forecast
correct forecast
relevant expectation
rational expectation

The _______ theory of the business cycle states that only unanticipated fluctuations in aggregate demand are the main source of economic fluctuations.

monetarist
rational expectations
new Keynesian
new classical

The new Keynesian theory of the business cycle regards _______ as the main source of economic fluctuations.

anticipated fluctuations in aggregate supply
unanticipated fluctuations in aggregate demand
volatile expectations
anticipated and unanticipated fluctuations in aggregate demand

The theory that regards random fluctuations in productivity as the main source of economic fluctuations is the __________________ of the business cycle.

dynamic general equilibrium theory
real business cycle theory
Keynesian theory
productivity theory

The 1991-1992 recession resulted from a _______ short-run aggregate supply _______ aggregate demand.

a percentage increase in; that was smaller than the percentage decrease in
a decrease in both; and
a percentage decrease in; that was larger than the percentage increase in
a percentage decrease in; that was smaller than the percentage increase in

The Great Depression began with a widespread expectation that the price level would fall that lead to ______________ and increased uncertainty that resulted in ____________________.

a lower real wage rate; an increase in investment
a decrease in the money wage rate; a decrease in investment
an increase in the real wage rate; an increase in investment
a decrease in the money supply; an increase in the money wage rate