Exam 14: Transmission and Amplification Mechanisms

An economy with a long-run potential growth rate of 1% experiences a positive real economic shock that increases the growth rate to 2%.If intertemporal substitution subsequently takes place,what could the eventual new GDP growth rate be?

When an investment has a high value under a specific condition but can't be shut down when conditions change,it is said to be:

If your university decides to build five new dormitories in anticipation of higher enrollment next year,this is an example of an irreversible investment.

Labor adjustment costs are higher if:

What is intertemporal substitution? How does intertemporal substitution affect the impact of a negative real shock on an economy?

In most advanced economies,economic activity is highest in the:

For a given economic shock,more irreversible investments in an economy will:

What economic effect has people allocating consumption across time to bring the greatest return?

Negative shocks tend to:

A negative shock to the economy,by remixing opportunities,induces more job searching and thus causes more search-related employment.

Marriage is a kind of irreversible investment.

Because of intertemporal substitution,a real shock has more of an effect on real GDP growth but less of an effect on inflation.

For a given negative economic shock,an economy with higher labor adjustment costs will have a:

The condition of time bunching implies that:

Which of the following explains why intertemporal substitution magnifies a negative economic shock?

Which of the following is NOT an example of intertemporal substitution?

If a house is worth $600,000,its owner owes $400,000 on the mortgage,and the value of the house falls to $300,000,how much equity will the owner have?

Irreversible investments have high:

People tend to work harder and longer hours during an economic boom than during a recession.

Because of intertemporal substitution,a negative shock to aggregate demand could result in: