Explain the view called real business cycle theory.
What will be an ideal response?
Real business cycle theory seeks to explain fluctuations in the business cycle through changes in potential output. Prices and wages are viewed as flexible, so inflation adjusts rapidly in response to demand and supply shocks. To explain recessions and booms, real business cycle theorists look to fluctuations in potential output, focusing on changes in productivity and their impact on gross domestic product. According to real business cycle theory, the only sources of fluctuations in output are shifts in productivity.
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All of the following can be used to reduce risk except which one?
A) settling a law suit B) entering into litigation C) purchasing insurance D) diversifying your stock portfolio
Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy?
A. 800 million B. 250 million C. 1.6 billion D. 1.0 billion
Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:
A. price, output, and average total cost would all be higher. B. price and average total cost would be higher, but output would be lower. C. price, output, and average total cost would all be lower. D. price and output would be lower, but average total cost would be higher.
A market where individual firms cannot affect the market price of their good is most likely:
A. a monopoly B. an oligopoly C. a monopolistically competitive market. D. perfectly competitive