Question 1

According to real business cycle theory,a fall in the real interest rate ________ the supply of labour and ________ employment.

Accepted Answer

The answer of According to real business cycle theory,a fall...

Question 2

According to real business cycle theory,if the Bank of Canada increases the quantity of money when real GDP decreases,real GDP

Accepted Answer

The answer of According to real business cycle theory,if the...

Question 3

In real business cycle theory,a decrease in productivity leads to all of the following events EXCEPT

Accepted Answer

In real business cycle theory, a decrease in productivity leads to a decrease in output, which causes a decrease in the demand for labor and loanable funds, and a fall in the real interest rate. However, the real wage rate is expected to fall rather than rise, as there is less demand for labor and more supply due to the decrease in output. Therefore, option C is the incorrect statement.

Question 4

Suppose that in response to a decrease in real interest rates,a person decides to reduce his supply of labour today and increase it in the future.This behaviour is most consistent with the

Accepted Answer

The answer of Suppose that in response to a decrease...

Question 5

The factor leading to business cycles in the ________ cycle theory is unexpected fluctuations in aggregate demand while in the ________ cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.

Accepted Answer

In the new classical cycle theory, unexpected fluctuations in aggregate demand are the only factor leading to business cycles. In contrast, in the new Keynesian cycle theory, both unexpected and expected fluctuations in aggregate demand are considered as factors that lead to business cycles.

Question 6

In real business cycle theory,the supply of labour

Accepted Answer

The answer of In real business cycle theory,the supply of...

Question 7

New Keynesian economists believe that ________ is influenced by ________.

Accepted Answer

New Keynesian economists believe that today's money wage rate is influenced by yesterday's rational expectations of the price level.

Question 8

According to the real business cycle theory,what effects follow from a change in productivity?
I.Investment demand changes.
II.The demand for labour changes.
III.Government expenditure changes.

Accepted Answer

According to the real business cycle theory, changes in productivity affect investment demand as firms are more likely to invest when productivity is high. It also affects the demand for labor as there is more output to be produced, leading to an increase in the demand for labor. However, productivity does not directly affect government expenditure, hence option III is not correct. Therefore, the best choice is B, which includes options I and II only.

Question 9

"Intertemporal substitution" in real business cycle theory refers to the change in the ________ as a result of the change in the real interest rate.

Accepted Answer

Intertemporal substitution refers to the decision by individuals to adjust their consumption and labor supply over time in response to changes in the real interest rate. As the real interest rate increases, individuals will tend to save more, which will reduce their current consumption and increase their supply of labor. This is because the higher real interest rate increases the return to saving, making it more attractive to postpone consumption and work more in the present period. Therefore, the correct choice is C, supply of labor.

Question 10

The key ripple effect in real business cycle theory is the ________ decision and it depends on the ________.

Accepted Answer

The key ripple effect in real business cycle theory is the decision of when to work, which depends on the real interest rate. Real business cycle theory suggests that fluctuations in real GDP are primarily caused by real shocks to the economy, such as changes in productivity or technology. People's decision to work is determined by the real wage rate, which is determined by the productivity of the economy. As the productivity of the economy changes, the real wage rate also changes, leading to changes in the decision of when to work. The real interest rate plays a key role in determining the productivity of the economy, which in turn affects the decision of when to work. Therefore, choice B is the best answer.

Question 11

According to real business cycle theory,workers' decisions to work now versus later depend on

Accepted Answer

Real business cycle theory suggests that workers' decisions to work depend on the real interest rate. The theory believes that fluctuations in the economy are caused by fluctuations in productivity and technology, and changes in the real interest rate can signal changes in future productivity and technology. As a result, workers respond to changes in the real interest rate by altering their work decisions.

Question 12

Suppose that a severe shock that decreases the demand for loanable funds hits Canada.Which of the following can we expect to occur according to real business cycle theory?

Accepted Answer

The answer of Suppose that a severe shock that decreases...

Question 13

Suppose that the business cycle in Canada is best described by RBC theory.
An advance in technology increases productivity.
The when-to-work decision depends on the real interest rate.The ________ the real interest rate,other things remaining the same,the ________ is the supply of labour today.
RBC theorists believe the when-to-work effect is ________.

Accepted Answer

According to RBC theory, an increase in productivity leads to an increase in output and a decrease in the real interest rate. A lower real interest rate increases the supply of labor today as it makes it more attractive for individuals to work now rather than save and consume in the future. RBC theorists believe that this when-to-work effect is significant and can lead to large fluctuations in employment and output. Therefore, the answer is C: a higher real interest rate leads to a larger supply of labor today, and the when-to-work effect is larger rather than smaller.

Question 14

According to real business cycle theory,an increase in productivity ________ the demand for loanable funds,________ the demand for labour,and ________ the supply of labour.The real interest rate will ________.

Accepted Answer

According to real business cycle theory, an increase in productivity will increase the demand for loanable funds and the demand for labour, and also increase the supply of labour. This leads to an increase in the real interest rate. Therefore, the best choice is D, as it reflects this relationship.

Question 15

Which business cycle theory emphasizes that,because of previously negotiated wage agreements,both expected and unexpected fluctuations in aggregate demand can change real GDP?

Accepted Answer

The new Keynesian cycle theory emphasizes the role of sticky wages and prices, which are often due to previously negotiated wage agreements. This stickiness means that both expected and unexpected changes in aggregate demand can affect real GDP.

Question 16

According to the real business cycle theory,during a recession the demand for labour ________ and the supply of labour ________.

Accepted Answer

According to the real business cycle theory, during a recession, there is a decrease in demand for goods and services, which leads to a decrease in demand for labor. As a result, businesses may lay off workers, which decreases the supply of labor. So, the demand for labor decreases and the supply of labor decreases.

Question 17

According to mainstream business cycle theory,________ grows at a steady rate and ________ grows at a fluctuating rate.

Accepted Answer

According to mainstream business cycle theory, potential GDP grows at a steady rate due to growth in factors of production such as labor, capital, and technology, while aggregate demand, which represents the total demand for goods and services in the economy, fluctuates due to changes in consumer and business confidence, government spending, and monetary policy.

Question 18

According to ________ theory,a decrease in productivity growth shifts the ________.

Accepted Answer

The answer of According to ________ theory,a decrease in productivity...

Question 19

In real business cycle theory,________ are the main source of economic fluctuations.

Accepted Answer

Real business cycle theory argues that fluctuations in productivity, such as innovations, technological progress, natural disasters, and weather conditions, are the main source of economic fluctuations. These fluctuations lead to changes in output, employment, and prices, which affect the business cycle. Unexpected changes in government expenditure or investment, fluctuations in the full-employment quantity of labor or changes in the quantity of money are not the main sources of economic fluctuations according to real business cycle theory.

Question 20

In real business cycle theory,the supply of labour

Accepted Answer

The answer of In real business cycle theory,the supply of...

Quiz 28: Canadian Inflation, Unemployment, and Business Cycle

According to real business cycle theory,a fall in the real interest rate the supply of labour and employment.

According to real business cycle theory,if the Bank of Canada increases the quantity of money when real GDP decreases,real GDP

In real business cycle theory,a decrease in productivity leads to all of the following events EXCEPT

Suppose that in response to a decrease in real interest rates,a person decides to reduce his supply of labour today and increase it in the future.This behaviour is most consistent with the

The factor leading to business cycles in the cycle theory is unexpected fluctuations in aggregate demand while in the cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.

In real business cycle theory,the supply of labour

New Keynesian economists believe that is influenced by .

According to the real business cycle theory,what effects follow from a change in productivity? I.Investment demand changes. II.The demand for labour changes. III.Government expenditure changes.

"Intertemporal substitution" in real business cycle theory refers to the change in the ________ as a result of the change in the real interest rate.

The key ripple effect in real business cycle theory is the decision and it depends on the .

According to real business cycle theory,workers' decisions to work now versus later depend on

Suppose that a severe shock that decreases the demand for loanable funds hits Canada.Which of the following can we expect to occur according to real business cycle theory?

According to real business cycle theory,an increase in productivity the demand for loanable funds, the demand for labour,and the supply of labour.The real interest rate will .

Which business cycle theory emphasizes that,because of previously negotiated wage agreements,both expected and unexpected fluctuations in aggregate demand can change real GDP?

According to the real business cycle theory,during a recession the demand for labour and the supply of labour .

According to mainstream business cycle theory, grows at a steady rate and grows at a fluctuating rate.

According to theory,a decrease in productivity growth shifts the .

In real business cycle theory,________ are the main source of economic fluctuations.

In real business cycle theory,the supply of labour