Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 10, Problem 4RQ
To determine
The facts pertaining to business cycles that have been successfully explained by the RBC theory.
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What the basic arguments stated by the Real-Business-Cycle (RBC) Theory, regarding economic fluctuations.
What role, if any, does monetary policy play in the Real Business Cycle Model?
Explain the Real-Business-Cycle (RBC) Theory, regarding economic fluctuations.
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- Explain the basic arguments stated by the Real-Business-Cycle (RBC) Theory, regarding economic fluctuations.arrow_forwardHow can the real business cycle model explain the behavior of the money supply over the business cycle?arrow_forwardGrowing and shrinking of economy is best interpreted by business cycle. Knowledge about this growing and shrinking mechanism of economy is very important for economists and policy makers to plan economic stabilization policies accordingly. In the light of these statements, write a note on different phases of business cycle and make its graph to categorize each phase properly.?arrow_forward
- According to the real business cycle model, are there anything that the centralbank can do to help the economy recover from the recession? Why? You do not need to drawfigures in this question.arrow_forwardWhich of the following are business cycle theories that regard fluctuations in aggregate demand as the factor that is creating business cycles? I. Keynesian cycle theory II. real business cycle theory III. monetarist cycle theoryarrow_forwardWhat are the two main perspectives on how business cycles arise and propagate? What are their key implications for the use of fiscal and monetary stabilisation policies?arrow_forward
- Are TFP shocks a reasonable explanation for the business cycles Are TFP shocks a reasonable explanation for the business cycles we see in modern economies? Why and why not? Are TFP shocks a reasonable explanation for the business cyclesarrow_forwardMany central banks now indicate that their primary objective is to keep inflation at a persistently low rate. If the rate of inflation is persistently low, will this help reduce the instability of the business cycle? Why or why not?arrow_forwardWhat impact would an increase in the nation's money supply or the federal government's budget deficit have on the real GDP and price level in the macroeconomy? What phase of the business cycle might this create?arrow_forward
- How do proponents of Real Business Cycle Theory explain thebusiness cycle, and why do they object to government intervention tosmooth the business cycle?arrow_forwardIn the context of Real Business Cycle theory explain the role played by the intertemporal substitution of labour supply in propagating the effects of real shocks in the economy. Do you think this propagation mechanism represents a good explanation for the business cycles we see in reality? Use a diagram to explain your answer.arrow_forwardExplain how the real business cycle model can explain why the price level is countercyclical at some times, and uncorrelated with output at other times.arrow_forward
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