Which of the following is true?
A. Employment and unemployment are both coincident with the business cycle.
B. Employment is procyclical and unemployment is coincident with the business cycle.
C. Employment is procyclical and unemployment is countercyclical.
D. Employment and unemployment are both procyclical.
Answer: C
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In the classical model, a change in aggregate demand
A) causes changes in both the long-run real GDP and in the price level. B) causes a change in long-run real GDP but not in the price level. C) causes a change in the price level but not in the long-run real GDP. D) has no effect on either real GDP or the price level.
Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?
A) 1 percent B) 5 percent C) 3 percent D) 6 percent