Exam 10: Classical Business Cycle Analysis

According to the misperceptions theory,if the Fed wanted to use monetary policy to influence the real economy it would have to

When,because of hiring and firing costs,firms retain workers in a recession that they would otherwise lay off,there is said to be

Use the classical (RBC)IS-LM-FE model to show the effects on the economy of a temporary adverse supply shock; for example,an increase in the price of oil.You should show the impact on the real wage,employment,output,the real interest rate,consumption,investment,and the price level.

One important reason why the Solow residual may be strongly procyclical even if the actual technology used in production doesn't change is that

The idea that expected future increases in output cause increases in the current money supply and that expected future decreases in output cause decreases in the current money supply,rather than the other way around,is known as

If the utilization rates of capital (u_K)and labor (u_N)are procyclical,then the Solow residual,as conventionally measured,is

The short-run aggregate supply curve can slope upward because

In the classical model,a temporary increase in government purchases causes

In recession years,________ jobs are lost than created,and vacancies and job openings ________.

If producers have imperfect information about the general price level and sometimes misinterpret changes in the general price level as changes in relative prices,then

During a recession,would classical economists propose that changes in government spending or taxes be used to improve economic conditions? Briefly explain.

Suppose the economy is characterized by the following equations. IS curve: r = 20.20 - 0.002Y LM curve: M/P = Y - 250(r + π^e) SRAS curve: Y = + 100(P - P^e) The nominal money supply is M = 19,800,expected inflation is π^e = 0.20,and full-employment output is $\bar{\gamma}$ = 10,000. (a)If the economy begins in general equilibrium,what are the equilibrium values of the price level,output,and the real interest rate? (b)If the expected price level is the price level you found in part (a),what happens to the price level,output,and the real interest rate in the short run if there's an unanticipated decrease in the nominal money supply to 14,737.5? {Hint: guess some price levels that differ from the one you found in part (a)by increments of 0.25.} (c)If the expected price level is the price level you found in part (a),what happens to the price level,output,and the real interest rate in the short run if there's an unanticipated increase in the nominal money supply to 24,937.5?

A jobless recovery occurs when

According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve ________,causing output to ________ in the short run.

Models that are similar to RBC models but allow for shocks other than productivity shocks are known as

Assuming money neutrality in the classical model,a 10% increase in the nominal money supply would cause

The most common measure of productivity shocks used by real business cycle theorists is

Real business cycle theorists think that most business cycle fluctuations are caused by shocks to

Describe,in general terms,how an economist calibrates a macroeconomic model.What statistics can be usefully examined to see how well the model corresponds to the data?

A temporary increase in government purchases in the classical model would