Question

According to RBC​ theory, what is the source of the business​ cycle? What is the role...

According to RBC​ theory, what is the source of the business​ cycle? What is the role of fluctuations in the rate of technological​ change?

According to RBC​ theory, the source of the business cycle is​ _______, which result mainly from​ _______.

A.

fluctuations in business​ confidence; fluctuations in aggregate demand

B.

rational expectations of the price​ level; unexpected fluctuations in aggregate demand

C.

fluctuations in​ productivity; fluctuations in the pace of technological change

D.

fluctuations in investment and​ consumption; fluctuations in the growth rate of the quantity of mone

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

According to Real Business Cycle theory, the main source of fluctuations in the business cycle is the fluctuations in productivity, which may result from fluctuations in the pace of technological change.

According to this theory, a change in productivity affects investment and labour demand. During a recession, both the demands decrease. The decrease in investment demand lowers the real interest rate, thus decreasing the supply of labour through intertemporal substitution. This leads to a decrease in GDP and fall in the price level. Hence, cycles of businesses.

Ans. (c)

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Real business cycle theory suggests the business cycle is caused by: Select one: a. discretionary monetary...
Real business cycle theory suggests the business cycle is caused by: Select one: a. discretionary monetary policy. b. “animal spirits.” c. protectionism. d. fluctuations in the rate of productivity. The school of thought that monetary policy should be the main tool of stabilization policy, that is skeptical about the use of fiscal policy, and that recognizes constraints on policy imposed by the natural rate of unemployment and the political business cycle is: Select one: a. classical macroeconomics. b. the Great...
Explain which business cycle theory, if Real business cycle or Keynesian Coordination failure model with or...
Explain which business cycle theory, if Real business cycle or Keynesian Coordination failure model with or without sticky prices, subscribes to each one of the following 1) Workers are worried about their position relative to other workers, and do not accept wage cuts in recessions. 2) Business cycles are caused by misguided government policies. 3) Business cycles are driven by changes in aggregate demand, which are, in turn, caused by fluctuations in government spending.
1. In the monetarist view a. changes in investment spending are a major source of macroeconomic...
1. In the monetarist view a. changes in investment spending are a major source of macroeconomic instability. b. inappropriate monetary policy is a major source of macroeconomic instability. c. adverse aggregate supply shocks are a major source of macroeconomic instability. d. the fact that prices and wages are flexible is a major source of macroeconomic instability. 2. Monetarists argue that changes in the money supply a. lead to direct changes in spending. b. work indirectly via increased investment. c. lead...
In the real business cycle theory, during a period when output is falling a.   workers are...
In the real business cycle theory, during a period when output is falling a.   workers are voluntarily giving up their jobs. b.   the quantity supplied of labor is falling. c.   aggregate productivity must be falling. d.   all of the above. e.   none of the above. Explain answer briefly.
2. Activist rules are monetary policy rules that change with the business cycle. are rules that...
2. Activist rules are monetary policy rules that change with the business cycle. are rules that adjust with deviations from potential GDP, but not inflation. are rules that adjust when inflation deviates from target, but do not respond to deviations from GDP. that do not adjust with the business cycle changes. 3. Over long periods of time, A. there is a positive, linear relationship between the rate of money growth and inflation. B. there is no predictable relationship between the...
1. Consider two countries: Country A and country B. At the begging of year 2017, the...
1. Consider two countries: Country A and country B. At the begging of year 2017, the GDP per capita in both countries is $10’000. The annual growth rate of output in country A is 3%, while the annual growth rate of output in country B is 5%. Population does not grow. What will be the difference in the GDP per capita of both countries at the beginning of year 2019? $200 More than $200 Less than $200 $2’000 2. Which...
Firms are most likely to experience collateral damage during a  _____, and their borrowing and investment activities...
Firms are most likely to experience collateral damage during a  _____, and their borrowing and investment activities will _____ its severity. a. recession; dampen b. recession; amplify c. expansion; dampen d. expansion; amplify According to macroeconomics theory, in the short run: Select one: a. there is a negative relationship between the inflation rate and real GDP growth rate b. real GDP growth will reach a maximum when the inflation rate is zero. c. there is a positive relationship between the inflation...
Question 11 pts Each of the following is an exogenous business cycle theory except the ___________...
Question 11 pts Each of the following is an exogenous business cycle theory except the ___________ theory. resource availability war monetary changes in purchases by foreigners Flag this Question Question 21 pts Which of the following is an endogenous factor of the business cycle? the innovation of new technology. the inventory cycle. underconsumption. all of the above. Flag this Question Question 31 pts An inflation hedge is a good that: declines in value during a period of high inflation can...
8. According to the Classical Dichotomy, a country with a hyper-inflation due to excessive money supply...
8. According to the Classical Dichotomy, a country with a hyper-inflation due to excessive money supply growth should have: nominal wage falling real wage falling real wage rising nominal wage rising 9. According to the Quantity Theory of Money and the Fisher equation, a rise in money supply (for a given level of GDP and velocity) should raise the: nominal interest rate and real interest rate inflation rate, nominal interest rate, and real interest rate inflation rate and nominal interest...
1. According to the new growth theory the rate of technological progress is determined by chance....
1. According to the new growth theory the rate of technological progress is determined by chance. the concept of a labor market is not necessary. the labor demand curve does not shift rightward over time. knowledge is not subject to diminishing returns. 2. If a rich country grows at a faster rate than a poor one, then the gap in their standard of living will close over time. the gap in their standard of living will widen over time. whether...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT