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1. We have discussed two models that describe the relationship between inflation and economic growth.  Which of the following is a property of the New Keynesian Model but NOT the Real Business Cycle (RBC) Model?a) Monetary policy has no effect on long run economic growthb) Recessions can be caused by a fall in aggregate demand.c) Prices are fully flexible in both the short and long run.d) All the above are properties of the RBC model.e) None of the above are properties of the New Keynesian model. 2. Consider both/either model of inflation and economic growth. In the long run, lower rates of money supply growth result in:a) higher GDP growth.b) lower GDP growth.c) higher inflation.d) lower velocity growth.e) lower inflation. 3. In the RBC model, if you observe unemployment levels rising, what is the likely cause?a) A negative real shockb) A negative aggregate demand shockc) A negative SRAS shockd) A&B onlye) None of the above

Question

1. We have discussed two models that describe the relationship between inflation and economic growth.  Which of the following is a property of the New Keynesian Model but NOT the Real Business Cycle (RBC) Model?

a) Monetary policy has no effect on long run economic growth

b) Recessions can be caused by a fall in aggregate demand.

c) Prices are fully flexible in both the short and long run.

d) All the above are properties of the RBC model.

e) None of the above are properties of the New Keynesian model.

 

2. Consider both/either model of inflation and economic growth. In the long run, lower rates of money supply growth result in:

a) higher GDP growth.

b) lower GDP growth.

c) higher inflation.

d) lower velocity growth.

e) lower inflation.

 

3. In the RBC model, if you observe unemployment levels rising, what is the likely cause?

a) A negative real shock

b) A negative aggregate demand shock

c) A negative SRAS shock

d) A&B only

e) None of the above

check_circleAnswer
Step 1

1.

From the given following, recession can be caused by a decrease in the aggregate demand is followed by the new Keynesian approach, but the real Business cycle (RBC) model relies on shock to the economy.

Thus, the option ‘b’ is correct.

Step 2

2.

According to the new Keynesian and real business cycle mode (RBC) model of inflation and economic growth, in long run, if the money supp...

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