ECON 303 Quiz #13 – Flashcards
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The classical dichotomy states that
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Real markets determine nominal outcomes, not the reverse
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If the central bank increases the growth rate of money supply, what will happen to an economy in the long run?
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Nothing happens to real GDP growth; both inflation rate and nominal interest rate increases
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Money neutrality states that
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Changes in money do not affect real aggregates
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According to the Real Business Cycle (RBC) theory, which of the following is a correct description of labor market behavior after a bad productivity shock hits the economy?
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Lower productivity shifts the labor demand curve to the left. The labor supply of households is adjustable. The new equilibrium has a lower wage and a lower labor input.
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If an increase of inflation rate is accompanied by a reduction of unemployment rate, we say that
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The Phillips curve holds.
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If the correlation between GDP and y is 0.55, we say y is
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Procyclical
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According to the Tylor rule, what does the US monetary policy do?
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Increase money supply during recession and reduce money supply when inflation rate goes up.
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Real investment tends to be
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Procyclical and more variable than real GDP
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Real business cycle (RBC) theory argues that the primary cause of economic fluctuation in
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Total Factor Productivity
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According to Real Business Cycle theory, which of the following correctly describes households consumption-saving response, when they are hit by an unfavorable productivity shock.
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Households experience a temporary income decrease today. They consume less today and decrease their saving.
