SOLVED

11) According to the real business cycle model, a rightward shift in the long-run aggregate supply schedule would be caused by________. A) a negative supply shock. B) an increase in aggregate demand. C) a positive supply shock. D) a decrease in aggregate demand. 12) Solow residuals are estimates of ________. A) deadweight loss B) the natural rate of unemployment C) aggregate productivity D) labor hoarding 13) Given the aggregate production function Y = A K0.3L0.7, the Solow residual equals ________ when Y is 60, K = 5 and L = 5. A) 2.4 B) 35 C) 25 D) 12 14) If output begins to grow substantially faster than capital and labor inputs, then the real business cycle model predicts, ceteris paribus, ________. A) an increase in inflation B) a decrease in employment C) a decrease in investment D) a business cycle expansion 15) In the aggregate production function Y = A K0.3L0.7, real business cycle theory treats ________ as the key independent variable. A) potential output B) productivity C) the capital stock D) the labor input 16) Real business cycle theorists take the comovement of aggregate output and Solow residuals as strong confirmation that economic fluctuations are caused by ________. A) changes in aggregate demand. B) changes in the money supply. C) changes in the rate of inflation. D) productivity shocks. 17) During business contractions, the growth rate of Solow residuals is ________. A) near or below zero B) well above zero C) approaching infinity D) impossible to calculate 18) In the real business cycle model, fluctuations in employment are explained by ________. A) changes in the composition of household assets. B) intertemporal substitution as real wages and real interest rates changes. C) changes in the marginal propensity to consume. D) the impact of a change in price on quantity demand and quantity supplied in goods markets. 19) According to real business cycle theory, a likely cause of an increase in employment is ________. A) an increase in the real wage B) an increase in aggregate demand C) a decrease in the real wage D) a decrease in the real interest rate 20) In the real business cycle model, unemployment is ________. A) costless to individual workers. B) the result of higher productivity. C) voluntary. D) the result of higher wages.