How do RBC economists face the business cycle fact that inflation is procyclical?
A) They argue that even though inflation doesn't fit their theory, everything else does, and inflation is not important.
B) They note that inflation would not be procyclical if monetary policy were conducted properly.
C) They argue that inflation is procyclical only because monetary policy shocks are the main cause of business cycles.
D) They use alternative statistical methods that suggest that inflation is countercyclical.
D
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The process by which financial institutions accept savings from businesses, households and governments and lend the savings to other businesses, households and governments is
A) asymmetric information. B) adverse selection. C) moral hazard. D) financial intermediation.
In a certain economy, the components of aggregate spending are given by: C = 500 + 0.8(Y - T) - 300rI = 200 - 400rG = 200NX = 10T = 150Given the information about the economy above, what would be the impact on aggregate expenditures of a one-percentage-point increase in the real interest rate (r)?
A. Aggregate expenditures would decrease by 35 units. B. Aggregate expenditures would decrease by 7 units. C. Aggregate expenditures would increase by 35 units. D. Aggregate expenditures would decrease by 700 units.
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?
A) never have to engage in trade with other nations B) increase the variety of products that it can produce with a decrease in resources C) consume a combination of goods that lies outside its own production possibilities frontier D) produce a combination of goods that lies outside its own production possibilities frontier
Keynesians prefer a disinflation policy of
A. stabilization. B. cold turkey. C. aggregate demand management. D. gradualism.