The second 15 questions cover the material in Chapter 12. A toy company's excess inventories get sold off. In the coordination failure model, the "good" equilibrium is characterized by a. lower real interest rate and a lower price level than the "bad" equilibrium. Indicates That Supply Side Shocks Cause Most Business Cycles. Which of the following shows the correct sequence of events from an initial shock to consumption and the resulting multiplier effects? Using your answer above, how does a pendulum-like structure contradict this property in economic fluctuations? Using sophisticated statistical techniques, economists can usually predict ____________. none currently captures all facets of the business cycle. (Check all that apply.). If an economic shock increases labor demand, equilibrium employment _________ and real GDP ________. An increase in mortgage defaults, negatively impacting banks. Question: The Real Business Cycle Theory Question 9 Options: A. Real Business Cycle Theory: regards random fluctuations in productivity as the main source of economic fluctuations ex) claims that fluctuations in the rate of growth of total factor productivity cause the business cycle. While the inverse relationship between unemployment and real GDP growth is unquestionable over time, it is not always proportional because ____________. According to Keynes's view on animal spirits, ____________. A government policy that is consistent with real business cycle theory would be for. Which of the following statements correctly describes features / implications of real business cycle (RBC) theory? . The economic theory that emphasizes the role of difficulties in coordinating economic affairs as a cause of economic fluctuations is known as 1) Keynesian economics. To put it simply, the business cycle is defined as the real fluctuations in economic activity and gross domestic product (GDP) over a period of time. Periods with volatile business cycles are those where the absolute value of the cyclical component is greater than its standard deviation.From another hand, periods characterized by an economic downturn are identified as periods where the level of real … B) real interest rate is zero. Real business cycle models assume individuals are rational agents seeking to maximise their utility. Which of the following key factors can help explain the Great Recession of 2007dash2009? A ﬂaw in real business cycle theory is the failure to carry out this scientiﬁc method. because people expect it to be the equilibrium. In 1973, the major oil-producing nations of the world declared an oil embargo. Or, alternatively technology shocks that alter labor productivity may shift the labor demand schedule (real business cycle theory.) The resulting fall in GDP and employment led the United States into a recession. emphasizes the role of changing productivity and technology in causing economic fluctuations. A) real business cycle B) rational expectations C) new classical D) supply-side 228.Joseph believes that changes in the business cycle can be attributed to shifts in the vertical aggregate supply curve. Political business cycle, fluctuation of economic activity that results from an external intervention of political actors.The term political business cycle is used mainly to describe the stimulation of the economy just prior to an election in order to improve prospects of the incumbent government getting reelected. Find GCSE resources for every subject. The concept of multipliers was one of the key elements of John Maynard Keynes's theory of fluctuations. The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (GDP) and other macroeconomic variables. When workers are laid off, what happens to physical capital? decreases the real wage and decreases employment. Real Business Cycle Theory: An economy witnesses a number of business cycles in its life. The post-recession wage is _________ the pre-recession wage. Partial recovery occurs while downward wage rigidity _______ in effect. labor hoarding slows down the hiring process. Its start coincided with a crash in the U.S. stock market. A) negative; unemployment rate B) negative; inflation rate an economic mechanism that causes an initial shock to be amplified by follow-on effects. Real business cycle theorist Bernd Lucke calls the new classical macroeconomics model the ″caricature of an economy" because its underlying assumptions exclude any non-rational behaviour or the possibility of market failure, prices are always fully flexible, and the market is always in economic equilibrium. Students. Real business cycle theory _____. D) irregular and unpredictable. The concept of multipliers was one of the key elements of John Maynard Keynes's theory of fluctuations. If an economy is stuck in a "bad" equilibrium in the coordination failure model, If, in the coordination failure model, the nominal money supply acts as a sunspot variable, then it is likely that the nominal money supply would, In the coordination failure model, we mention sunspots because, apparently irrelevant events may influence business cycles, One potential weakness of the coordination failure model as an explanation of business cycles is that. The Imperfect-Information Model a. For the coordination failure model to work, it must be the case that the aggregate labor demand curve must be. Honor Code. According to these “realists,” technology shocks emanate from events that prevent an economy from producing the goods and services that it produced in the past. The National Bureau of Economic Research (NBER) Business Cycle Dating Committee has been dating the U.S. expansions and recessions for the past 60 years. the economy could fluctuate beyond the level that could be explained by the underlying economic fundamentals. at the aggregate level, but not at the level of the individual firm. What is the appropriate monetary policy response to a situation with deficient financial liquidity, when there is a liquidity trap? (Check all that apply.). This led to widespread inflation as costs of production increased steeply. tendency of money to lead output may be due to. 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