Question 1

According to real business cycle theorists,the tendency of money to lead output may be due to

Accepted Answer

A)   government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date.
B)   the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Federal Reserve's use of all available information in trying to stabilize the price level.
C)   the Federal Reserve's use of all available information in trying to stabilize the price level and the Federal Reserve's use of all available information in trying to stabilize the level of economic activity.
D)   the Federal Reserve's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in economic activity.E) A) and B)
F) None of the above

Question 2

The real business cycle model best explains the procyclicality of the nominal money supply by

Accepted Answer

A)   an unpredictable Federal Reserve.
B)   exogenous money.
C)   endogenous money.
D)   uncorrelated money.E) A) and D)
F) C) and D)

Question 3

In the coordination failure model,how is a particular equilibrium attained?

Accepted Answer

A)   The Federal Reserve picks it.
B)   It depends on total factor productivity shocks.
C)   It depends on money supply shocks.
D)   because people expect it to be the equilibrium.E) A) and C)
F) C) and D)

Question 4

In the coordination failure model,the "good" equilibrium is characterized by a

Accepted Answer

A)   higher real interest rate and a higher price level than the "bad" equilibrium.
B)   higher real interest rate and a lower price level than the "bad" equilibrium.
C)   lower real interest rate and a higher price level than the "bad" equilibrium.
D)   lower real interest rate and a lower price level than the "bad" equilibrium.E) B) and C)
F) A) and D)

Question 5

In the real business cycle model,an increase in current total factor productivity

Accepted Answer

A)   increases investment demand.
B)   decreases investment demand.
C)   has no impact on investment demand.
D)   has an ambiguous effect on investment demand.E) None of the above
F) All of the above

Question 6

There are several competing models of the business cycle because

Accepted Answer

A)   none currently captures all facets of the business cycle.
B)   they are all rooted in different philosophical traditions.
C)   different shocks need different models.
D)   they depend on the type of policy that is adopted.E) None of the above
F) C) and D)

Question 7

According to real business cycle theory

Accepted Answer

A)   monetary policy is driving business cycles.
B)   Federal Reserve actions need to be watched closely.
C)   technology shocks have a major role in business cycles.
D)   cash-in-advance is necessarily to explain business cycles.E) A) and B)
F) B) and C)

Question 8

There are several competing models of the business cycle because

Accepted Answer

A)   none currently captures all facets of the business cycle.
B)   they are all rooted in different philosophical traditions.
C)   different shocks need different models.
D)   they depend on the type of policy that is adopted.E) A) and D)
F) B) and C)

Question 9

In the coordination failure model,a rightward shift in the labor supply curve

Accepted Answer

A)   increases the real wage and increases employment.
B)   increases the real wage and decreases employment.
C)   decreases the real wage and increases employment.
D)   decreases the real wage and decreases employment.E) None of the above
F) A) and B)

Question 10

If,in the coordination failure model,the nominal money supply acts as a sunspot variable,then it is likely that the nominal money supply would

Accepted Answer

A)   be procyclical.
B)   be acyclical.
C)   be countercyclical.
D)   alternatively appear to be procyclical and countercyclical.E) All of the above
F) C) and D)

Question 11

Extraneous events that are completely unrelated to economic fundamentals are called

Accepted Answer

A)   moonbeams.
B)   black holes.
C)   sunspots.
D)   time warps.E) A) and D)
F) B) and D)

Question 12

A Keynesian model that is consistent with fully flexible wages and prices is based upon the notion of

Accepted Answer

A)   cooperation failures.
B)   coordination failures.
C)   collaboration failures.
D)   decreasing returns to scale.E) A) and B)
F) None of the above

Question 13

In the coordination failure model,the most likely explanation of business cycles are

Accepted Answer

A)   money supply shocks.
B)   government spending shocks.
C)   total factor productivity shocks.
D)   fluctuations between "good" and "bad" equilibria.E) B) and D)
F) A) and D)

Question 14

The real business cycle model replicates the key business cycle regularities

Accepted Answer

A)   both qualitatively and quantitatively.
B)   qualitatively but not quantitatively.
C)   quantitatively but not qualitatively.
D)   neither qualitatively nor quantitatively.E) All of the above
F) B) and C)

Question 15

Business cycle models with flexible prices

Accepted Answer

A)   are all non-Keynesian models.
B)   were first introduced in the General Theory of Employment, Interest, and Money.
C)   the only business cycle models in use.
D)   none of the above.E) B) and C)
F) A) and D)

Question 16

In real business cycle theory,the persistence of shocks to total factor productivity is justified by

Accepted Answer

A)   the fact that some capital depreciates every period.
B)   the behavior of Solow residuals.
C)   the fact that Taylor rules have been used in post-war United States.
D)   the fact that capital takes some time to build.E) B) and C)
F) A) and B)

Question 17

Real business cycle theory was introduced by

Accepted Answer

A)   Milton Friedman and Robert Lucas.
B)   Milton Friedman and Anna Schwartz.
C)   Thomas Cooley and Gary Hansen.
D)   Finn Kydland and Edward Prescott.E) A) and C)
F) A) and D)

Exam 13: Business Cycle Models with Flexible Prices and Wages

In the real business cycle model,an increase in current total factor productivity

Correct Answer
verified

In the coordination failure model,the "good" equilibrium is characterized by a

Correct Answer
verified

There are several competing models of the business cycle because

Correct Answer
verified

The real business cycle model replicates the key business cycle regularities

Correct Answer
verified

Real business cycle theory was introduced by

Correct Answer
verified

In real business cycle theory,the persistence of shocks to total factor productivity is justified by

Correct Answer
verified

In the coordination failure model,a rightward shift in the labor supply curve

Correct Answer
verified

According to real business cycle theory

Correct Answer
verified

In the coordination failure model,the most likely explanation of business cycles are

Correct Answer
verified

The real business cycle model best explains the procyclicality of the nominal money supply by

Correct Answer
verified

A Keynesian model that is consistent with fully flexible wages and prices is based upon the notion of

Correct Answer
verified

If,in the coordination failure model,the nominal money supply acts as a sunspot variable,then it is likely that the nominal money supply would

Correct Answer
verified

In the coordination failure model,how is a particular equilibrium attained?

Correct Answer
verified

Business cycle models with flexible prices

Correct Answer
verified

According to real business cycle theorists,the tendency of money to lead output may be due to

Correct Answer
verified

There are several competing models of the business cycle because

Correct Answer
verified

Extraneous events that are completely unrelated to economic fundamentals are called

Correct Answer
verified

Exam 13: Business Cycle Models with Flexible Prices and Wages

In the real business cycle model,an increase in current total factor productivity

Correct AnswerverifiedShow Answer

In the coordination failure model,the "good" equilibrium is characterized by a

Correct AnswerverifiedShow Answer

There are several competing models of the business cycle because

Correct AnswerverifiedShow Answer

The real business cycle model replicates the key business cycle regularities

Correct AnswerverifiedShow Answer

Real business cycle theory was introduced by

Correct AnswerverifiedShow Answer

In real business cycle theory,the persistence of shocks to total factor productivity is justified by

Correct AnswerverifiedShow Answer

In the coordination failure model,a rightward shift in the labor supply curve

Correct AnswerverifiedShow Answer

According to real business cycle theory

Correct AnswerverifiedShow Answer

In the coordination failure model,the most likely explanation of business cycles are

Correct AnswerverifiedShow Answer

The real business cycle model best explains the procyclicality of the nominal money supply by

Correct AnswerverifiedShow Answer

A Keynesian model that is consistent with fully flexible wages and prices is based upon the notion of

Correct AnswerverifiedShow Answer

If,in the coordination failure model,the nominal money supply acts as a sunspot variable,then it is likely that the nominal money supply would

Correct AnswerverifiedShow Answer

In the coordination failure model,how is a particular equilibrium attained?

Correct AnswerverifiedShow Answer

Business cycle models with flexible prices

Correct AnswerverifiedShow Answer

According to real business cycle theorists,the tendency of money to lead output may be due to

Correct AnswerverifiedShow Answer

There are several competing models of the business cycle because

Correct AnswerverifiedShow Answer

Extraneous events that are completely unrelated to economic fundamentals are called

Correct AnswerverifiedShow Answer

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