Game of Theories: Real Business Cycle Practice Questions | Marginal Revolution University

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Practice Questions

Game of Theories: Real Business Cycle Practice Questions

1. According to real business cycle theory, negative real shocks initially affect _______. *

a. Long run aggregate supply

b. Wages

c. Aggregate demand

d. The money supply

e. None of the above.

2. According to real business cycle theory, how can we avoid recessions? *

a. Stabilize monetary policy.

b. Offset negative real shocks with lower aggregate demand.

c. Use fiscal policy to avoid negative real shocks.

d. Diversify the economy.

3. Which of the following is a weakness of real business cycle theory? *

a. It doesn’t explain why negative supply shocks affect the entire economy.

b. It doesn’t explain why negative supply shocks happen in the first place.

c. It doesn’t explain why unemployment is so high during recessions.

d. It only makes sense for agricultural economies.

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Principles of Economics Macroeconomics

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The Dangers of Fiscal Policy

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Principles of Economics: Macroeconomics

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