How do RBC economists face the business cycle fact that inflation is procyclical?
A. They argue that inflation is procyclical only because monetary policy shocks are the main cause of business cycles.
B. They use alternative statistical methods that suggest that inflation is countercyclical.
C. They note that inflation would not be procyclical if monetary policy were conducted properly.
D. They argue that even though inflation doesn't fit their theory, everything else does, and inflation is not important.
Answer: B
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A) the real-balance effect B) the wage effect C) the nominal-balance effect D) the price level effect
The purchase of a U.S. asset by a foreign resident is a
A) surplus item on the current account. B) deficit item on the financial account. C) surplus item on the financial account. D) deficit item on the current account.
The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is
A) -2.0. B) -0.5. C) 0.5. D) 2.0.
Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?
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