What is Real Business Cycle Theory? What drives business cycles in this model? Where do these shocks come from?
What will be an ideal response?
In the Real Business Cycle Theory, changes in output are driven by changes in technology, which change aggregate supply. The changes in technology can be driven by new inventions, natural disasters, changes in the public's preferences for work, discoveries of natural resources, or government regulations and taxation which affect both firm's and worker's incentives to produce.
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Most economists believe that a zero rate of unemployment
A) is obtainable with the correct monetary policy. B) would result in a better functioning economy. C) is inconsistent with a well-functioning economy. D) is obtainable only if the inflation rate is also zero.
The rationing function of prices refers to the:
A. fact that ration coupons are needed to alleviate wartime shortages of goods. B. tendency of supply and demand to shift in opposite directions. C. ability of the market system to generate an equitable distribution of income. D. capacity of a competitive market to equate the quantity demanded and the quantity supplied.
Which of the following are true about functions in the duality picture:
A. Compensated demand functions are homogeneous of degree zero in prices. B. Uncompensated demand functions are homogeneous of degree zero. C. Expenditure functions are homogeneous of degree zero. D. Both (a) and (b). E. Both (b) and (c). F. Both (a) and (c). G. All of the above. H. None of the above.
Refer to the payoff matrix below. In reference to the Nash equilibrium/equilibria in this game, which of the following is true?
Cruise R Us and Cruise the World compete in the cruise line industry. Each firm needs to determine if they are going to offer special cruise packages with special rates or not offer the specials. The above payoff matrix shows the firms' net economic profit for each set of strategies.
A) There are two Nash equilibria in this game.
B) There is one Nash equilibrium in this game.
C) There are three Nash equilibria in this game.
D) There are no Nash equilibria in this game.