Question 1

According to real business cycle theory,business cycles

Accepted Answer

A) can be eliminated with appropriate monetary and fiscal policy. 
B) are natural and efficient reactions to changes in productivity. 
C) do not occur. 
D) occur infrequently. 
E) none of the above. 
A) can be eliminated with appropriate monetary and fiscal policy. 
B) are natural and efficient reactions to changes in productivity. 
C) do not occur. 
D) occur infrequently. 
E) none of the above. B

Question 2

What role is there for monetary policy in a real business cycle model? Is there a role for stabilization policy? Compare and contrast this with the traditional Keynesian model.

Accepted Answer

Monetary policy should concentrate on the price level in the real business cycle model.A desirable monetary policy would be one that resulted in slow,steady growth in the money supply,and thus stable prices,or at least a low rate of inflation.In business cycle models real,not monetary,factors are responsible for fluctuations in output and employment.For the same reason,stabilization policy is useless.Instead,public policy should focus on increasing productivity and increasing aggregate supply.Keynesians focus on aggregate demand-driven changes in output.Because aggregate demand is inherently unstable in this model,stabilization policy is needed to offset these fluctuations.

Question 3

Real business cycle theorists agree with new Keynesian economists that

Accepted Answer

A) agents maximize utility. 
B) the labor market do not clear. 
C) AS shocks can play a big role in business cycles. 
D) Both a and C 
A) agents maximize utility. 
B) the labor market do not clear. 
C) AS shocks can play a big role in business cycles. 
D) Both a and C A

Question 4

What would be the explanation of the Great Depression offered by proponents of real business cycle models? Do you see any potential problems with their explanations?

Accepted Answer

Real Business Cycle models would explain

Question 5

New Keynesian economists believe that

Accepted Answer

A) movements in unemployment can be explained by voluntary movements in and out of the labor market.. 
B) everyone who is not working is involuntary unemployed. 
C) labor markets clear in the long-run. 
D) the new classical model has merit,but recessions cannot be adequately explained in a model of with perfectly flexible prices and wages. 
A) movements in unemployment can be explained by voluntary movements in and out of the labor market.. 
B) everyone who is not working is involuntary unemployed. 
C) labor markets clear in the long-run. 
D) the new classical model has merit,but recessions cannot be adequately explained in a model of with perfectly flexible prices and wages.

Question 6

The real business cycle theory is most closely related to

Accepted Answer

A) Keynesian theory. 
B) monetarist theory. 
C) the classical model. 
D) the new Keynesian model. 
A) Keynesian theory. 
B) monetarist theory. 
C) the classical model. 
D) the new Keynesian model.

Question 7

According to real business cycle theory,an increase in taxes

Accepted Answer

A) would significantly reduce labor supply,increase employment,and decrease output. 
B) a decline in employment but not in output. 
C) would significantly reduce labor supply,and decrease employment and output. 
D) no change in output and employment. 
A) would significantly reduce labor supply,increase employment,and decrease output. 
B) a decline in employment but not in output. 
C) would significantly reduce labor supply,and decrease employment and output. 
D) no change in output and employment.

Question 8

Define hysteresis.How do insider-outsider models explain hysteresis?

Accepted Answer

A variable exhibits hysteresis if,when s

Question 9

In what sense is unemployment voluntary in real business cycle and classical models? In what sense is unemployment involuntary in Keynesian and new Keynesian models?

Accepted Answer

In the classical and real business cycle

Question 10

Which of the following statements are correct? In (the)

Accepted Answer

A) Keynesian model,unemployment is voluntary. 
B) real business cycle models,all unemployment is voluntary. 
C) new classical models,there is voluntary unemployment. 
D) Both b and c 
E) All of the above 
A) Keynesian model,unemployment is voluntary. 
B) real business cycle models,all unemployment is voluntary. 
C) new classical models,there is voluntary unemployment. 
D) Both b and c 
E) All of the above

Question 11

Consider the turnover cost model of efficiency wages.Suppose that the government imposes a tax on hiring a worker.What should happen to wages and unemployment?

Accepted Answer

If a tax is imposed on new workers,then

Question 12

A key element of real business cycle theory is that

Accepted Answer

A) labor supply is not responsive to changes in real wages. 
B) labor supply is highly elastic. 
C) as the wage increases,workers are richer and work less. 
D) none of the above. 
A) labor supply is not responsive to changes in real wages. 
B) labor supply is highly elastic. 
C) as the wage increases,workers are richer and work less. 
D) none of the above.

Question 13

Which of the following statements is correct? With respect to efficiency wage models,

Accepted Answer

A) their key element is an explanation of why the efficiency (or productivity)of workers depends on the real wage. 
B) the rationale underlying those models implies that firms will set the real wage above the market clearing level. 
C) they explain a real wage rigidity. 
D) all of the above 
A) their key element is an explanation of why the efficiency (or productivity)of workers depends on the real wage. 
B) the rationale underlying those models implies that firms will set the real wage above the market clearing level. 
C) they explain a real wage rigidity. 
D) all of the above

Question 14

In real business cycle models,business cycles are caused by ______,while in new Keynesian model,business cycles are caused by ________.

Accepted Answer

A) aggregate demand; aggregate demand 
B) aggregate demand; aggregate supply. 
C) aggregate supply; aggregate demand. 
D) fiscal policy; monetary policy 
A) aggregate demand; aggregate demand 
B) aggregate demand; aggregate supply. 
C) aggregate supply; aggregate demand. 
D) fiscal policy; monetary policy

Question 15

New Keynesian theory says that

Accepted Answer

A) changes in the money supply can have long run and short run effects on real variables. 
B) changes in the money supply can have short run effects on real variables,but not long run effects. 
C) changes in the money supply can have long run effects on real variables,but not short run effects. 
D) changes in the money supply have no effect on real variables in the short run or the long run. 
A) changes in the money supply can have long run and short run effects on real variables. 
B) changes in the money supply can have short run effects on real variables,but not long run effects. 
C) changes in the money supply can have long run effects on real variables,but not short run effects. 
D) changes in the money supply have no effect on real variables in the short run or the long run.

Question 16

With respect to efficiency wage models,the efficiency of workers depends

Accepted Answer

A) positively on the money wage they are paid. 
B) positively on the real wage they are paid. 
C) inversely on the age of the workers. 
D) positively on the unemployment rate. 
A) positively on the money wage they are paid. 
B) positively on the real wage they are paid. 
C) inversely on the age of the workers. 
D) positively on the unemployment rate.

Question 17

The existence of heavy training costs would provide a rationale for

Accepted Answer

A) insider-outsider models. 
B) IS-LM models. 
C) sticky price models. 
D) modern efficiency wage models 
A) insider-outsider models. 
B) IS-LM models. 
C) sticky price models. 
D) modern efficiency wage models

Question 18

Which of the following statements is (are)correct?

Accepted Answer

A) Real business cycle theorists remain convinced that the business cycle can be explained as an equilibrium phenomenon 
B) According to real business cycle theorists,fluctuations in output come as optimizing agents respond to real shocks that affect production possibilities 
C) Real business cycle theorists consider policies to prevent fluctuations in output unnecessary 
D) Both a and b 
E) All of the above 
A) Real business cycle theorists remain convinced that the business cycle can be explained as an equilibrium phenomenon 
B) According to real business cycle theorists,fluctuations in output come as optimizing agents respond to real shocks that affect production possibilities 
C) Real business cycle theorists consider policies to prevent fluctuations in output unnecessary 
D) Both a and b 
E) All of the above

Question 19

According to new Keyneisan theory,real wages are _____ correlated with employment and the portion of the population that is not in the labor market _____ with higher real wages.

Accepted Answer

A) positively; rises. 
B) negatively,does not change. 
C) negatively,rises. 
D) positively; falls. 
E) none of the above. 
A) positively; rises. 
B) negatively,does not change. 
C) negatively,rises. 
D) positively; falls. 
E) none of the above.

Question 20

Real business cycle proponents argue that

Accepted Answer

A) employment is sensitive to changes in the real wage. 
B) everyone who wants a job at the current wage can get one. 
C) during recessions,people choose not to work. 
D) all of the above. 
A) employment is sensitive to changes in the real wage. 
B) everyone who wants a job at the current wage can get one. 
C) during recessions,people choose not to work. 
D) all of the above.

According to real business cycle theory,business cycles

What role is there for monetary policy in a real business cycle model? Is there a role for stabilization policy? Compare and contrast this with the traditional Keynesian model.

Real business cycle theorists agree with new Keynesian economists that

What would be the explanation of the Great Depression offered by proponents of real business cycle models? Do you see any potential problems with their explanations?

New Keynesian economists believe that

The real business cycle theory is most closely related to

According to real business cycle theory,an increase in taxes

Define hysteresis.How do insider-outsider models explain hysteresis?

In what sense is unemployment voluntary in real business cycle and classical models? In what sense is unemployment involuntary in Keynesian and new Keynesian models?

Which of the following statements are correct? In (the)

Consider the turnover cost model of efficiency wages.Suppose that the government imposes a tax on hiring a worker.What should happen to wages and unemployment?

A key element of real business cycle theory is that

Which of the following statements is correct? With respect to efficiency wage models,

In real business cycle models,business cycles are caused by ,while in new Keynesian model,business cycles are caused by __.

New Keynesian theory says that

With respect to efficiency wage models,the efficiency of workers depends

The existence of heavy training costs would provide a rationale for

Which of the following statements is (are)correct?

According to new Keyneisan theory,real wages are _ correlated with employment and the portion of the population that is not in the labor market _ with higher real wages.

Real business cycle proponents argue that

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 12: Real Business Cycles and New Keynesian Economics

According to real business cycle theory,business cycles

What role is there for monetary policy in a real business cycle model? Is there a role for stabilization policy? Compare and contrast this with the traditional Keynesian model.

Real business cycle theorists agree with new Keynesian economists that

What would be the explanation of the Great Depression offered by proponents of real business cycle models? Do you see any potential problems with their explanations?

New Keynesian economists believe that

The real business cycle theory is most closely related to

According to real business cycle theory,an increase in taxes

Define hysteresis.How do insider-outsider models explain hysteresis?

In what sense is unemployment voluntary in real business cycle and classical models? In what sense is unemployment involuntary in Keynesian and new Keynesian models?

Which of the following statements are correct? In (the)

Consider the turnover cost model of efficiency wages.Suppose that the government imposes a tax on hiring a worker.What should happen to wages and unemployment?

A key element of real business cycle theory is that

Which of the following statements is correct? With respect to efficiency wage models,

In real business cycle models,business cycles are caused by ______,while in new Keynesian model,business cycles are caused by ________.

New Keynesian theory says that

With respect to efficiency wage models,the efficiency of workers depends

The existence of heavy training costs would provide a rationale for

Which of the following statements is (are)correct?

According to new Keyneisan theory,real wages are _____ correlated with employment and the portion of the population that is not in the labor market _____ with higher real wages.

Real business cycle proponents argue that

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

In real business cycle models,business cycles are caused by ,while in new Keynesian model,business cycles are caused by __.

According to new Keyneisan theory,real wages are _ correlated with employment and the portion of the population that is not in the labor market _ with higher real wages.