Question

Please do it by type not pics.

1.The macroeconomic starting point for the original Keynesian school of thought:

a.at a point greater than potential GDP.

b.rigorously anchored at potential GDP.

c.at a real interest rate of zero.

d.not clearly defined and assumed to be at a point less than potential GDP.

2.Okun's Law states that for every two percent that actual GDP is above potential GDP, the actual rate of unemployment is_____ percent _______ the natural rate of unemployment.

a.two, equals

b.one, below

c.one, above

d.two, above

3.The real business cycle theory:

a.is true for all of these answers.

b.denies a role of the FED in macroeconomic stabilization.

c.focuses on productivity shocks to the economy.

d.is a supply side school of thought.

e.denies demand side effects on the macro-economy.

Answer 1

1. Answer is d.

As the Keynesian eco is strictly in sharp contrast to classicals which call for full employment level of output, Keynesianism focus on less than full employment, thus starting point is not much clarified but we can assume it to be less than potential GDP, & not the above the potential level of output

2 . Answer b.

Okun law is an inverse relationship between the GDP & unemployment.

So if GDP is above the pitenpote level, then unemployment level will necessarily below the natural unemployment rate .

Thus the law states that unemployment will be one % below than Un.

3. Answer is d.

The real business cycle theory is a supply side concept

As business cycle is explained using supply side shocks like production technology, labor supply, weather , inputs.& Others.