"economics"exercise:Real business cycle model
The statement that is most consistent with real business cycle (RBC) models is that:
A、 persons are unemployed because their asking wages are too high.
B 、governments should intervene when the economy is in contraction.
C 、monetary variables have a major impact on GDP growth.
A decrease in average weekly initial claims for unemployment is most likely indicative of:
A 、an economic recovery beginning.
B 、the business cycle reaching its peak.
C 、an economic downturn beginning.
A is correct. As suggested particularly by the earliest RBC models, a person is unemployed because he or she is asking for wages that are too high.
B is incorrect. RBC models of the business cycle conclude that expansions and contractions represent efficient operation of the economy in response to external real shocks. Because the level of economic activity at any time is consistent with maximizing expected utility, the policy recommendation of RBC theory is for government not to intervene in the economy with discretionary fiscal and monetary policy.
C is incorrect. The initial New Classical models did not include money; they were called real business cycle models (often abbreviated as RBC). Cycles have real causes, such as changes in technology, whereas monetary variables, such as inflation, are assumed to have no effect on GDP and unemployment.
A is correct. Average weekly initial claims for unemployment insurance is a leading indicator of economic activity, and a decrease in it is an indication of rehiring at the start of a recovery.
B is incorrect. A decrease in average weekly initial claims for unemployment is a positive leading indicator, indicating that an upturn is coming, not that a peak has been hit.
C is incorrect. A decrease in average weekly initial claims for unemployment is a positive leading indicator, indicating that an upturn is coming, not a downturn.