Q: In the real business cycle theory, why can’t the change in
In the real business cycle theory, why can’t the change in the money supply prompted by a series of events catalyzed by an adverse supply shock be considered the cause of the business cycle?
See AnswerQ: The expected inflation rate is 5 percent and the actual inflation rate
The expected inflation rate is 5 percent and the actual inflation rate is 7 percent. According to Friedman, is the economy in long-term equilibrium? Explain your answer.
See AnswerQ: According to Friedman, how do we know when the economy is
According to Friedman, how do we know when the economy is in long-run equilibrium?
See AnswerQ: What is a major difference between adaptive and rational expectations? Give
What is a major difference between adaptive and rational expectations? Give an example of each.
See AnswerQ: “The policy ineffectiveness proposition (connected with new classical theory)
“The policy ineffectiveness proposition (connected with new classical theory) does not eliminate policymakers’ ability to reduce unemployment through aggregate demand-increasing policies, because they...
See AnswerQ: Why is the new classical theory associated with the word “classical
Why is the new classical theory associated with the word “classical”? Why has it been said that classical theory failed where new classical theory succeeds—because the former could not explain the bus...
See AnswerQ: Suppose a permanent downward-sloping Phillips curve existed and offered a
Suppose a permanent downward-sloping Phillips curve existed and offered a menu of choices of different combinations of inflation and unemployment rates to policymakers. How do you think society would...
See AnswerQ: Assume a current short-run tradeoff between inflation and unemployment,
Assume a current short-run tradeoff between inflation and unemployment, as well as a change in technology that permits the wider dispersion of economic policy news. How would the change affect the tra...
See AnswerQ: New Keynesian theory holds that wages are not completely flexible because of
New Keynesian theory holds that wages are not completely flexible because of such things as long-term labor contracts. New classical economists often respond that experience teaches labor leaders to d...
See AnswerQ: What evidence can you point to which suggests that individuals form their
What evidence can you point to which suggests that individuals form their expectations adaptively? What evidence can you point to which suggests that individuals form their expectations rationally?
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