macro95ex10

macro95ex10 - Chapter 10 Classical Business Cycle Analysis:...

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Chapter 10 Classical Business Cycle Analysis: Market-Clearing Macroeconomics T Multiple Choice Questions 1. Which of the following is not a primary cause of business cycle fluctuations, according to real business cycle theory? (a) A change in the production function (b) A change in the size of the labor force (c) A change in the money supply (d) A change in the real quantity of government purchases Answer: C Level of difficulty: 1 Section: 10.1 2. The distinction between real and nominal shocks is that (a) real shocks directly affect only the IS curve, but not the FE line or LM curve. (b) real shocks directly affect only the FE line, but not the LM curve. (c) real shocks directly affect only the IS curve or the FE line, but not the LM curve. (d) real shocks have a large direct effect on the IS curve and the FE line, but only a small direct effect on the LM curve. Answer: C Level of difficulty: 2 Section: 10.1 3. Real business cycle theorists think that most business cycle fluctuations are caused by shocks to (a) the production function. (b) the size of the labor force. (c) the real quantity of government purchases. (d) the spending and saving decisions of consumers. Answer: A Level of difficulty: 1 Section: 10.1
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Chapter 10 Classical Business Cycle Analysis: Market-Clearing Macroeconomics 149 4. Which of the following is an example of a productivity shock? (a) The introduction of new management techniques (b) A change in taxes on corporate profits (c) A change in the level of government transfer programs (d) An increase in the money supply Answer: A Level of difficulty: 1 Section: 10.1 5. A temporary adverse productivity shock would (a) shift the labor supply curve upward. (b) decrease the level of employment. (c) decrease future income. (d) decrease the expected future marginal product of capital. Answer: B Level of difficulty: 2 Section: 10.1 6. A beneficial productivity shock would _____ output, _____ the real interest rate, and _____ the price level. (a) increase; decrease; increase (b) increase; decrease; decrease (c) increase; increase; decrease (d) decrease; decrease; increase Answer: B Level of difficulty: 2 Section: 10.1 7. An adverse supply shock would directly _____ labor productivity by changing the amount of output that can be produced with any given amount of capital and labor. It would also indirectly _____ average labor productivity through changes in the level of employment. (a) increase; increase (b) increase; decrease (c) decrease; increase (d) decrease; decrease Answer: C Level of difficulty: 2 Section: 10.1 8. When RBC economists work out a detailed numerical example of a more general theory, they are performing (a) econometrics. (b) number theory. (c) calibration. (d) topology. Answer: C Level of difficulty: 2 Section: 10.1
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150 Abel/Bernanke • Macroeconomics, Fifth Edition 9. When RBC economists compare the volatility in their models to the data, what are they looking at?
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macro95ex10 - Chapter 10 Classical Business Cycle Analysis:...

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