If There Are Total Factor Productivity Shocks in the New

question 26

Multiple Choice

If there are total factor productivity shocks in the New Keynesian model, and the central bank always reduces the output gap to zero,

• A) the New Keynesian model will produce the same data as the real business cycle model.
• B) the New Keynesian model will produce the same data as the real business cycle model only if the central bank pegs the price level in the real business cycle model.
• C) average labour productivity is countercyclical.
• D) employment is countercyclical.
• E) employment is constant.

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Definitions:

STM

Short-Term Memory, a part of the memory system where information is stored for a short duration, typically seconds to minutes.

Polygenic

Referring to a trait or characteristic that is influenced by multiple genes rather than a single gene.

Monogenic Inheritance

A hereditary pattern where a trait is determined by a single gene.

Correlation And Causation

The relationship between two variables where one variable is found to be related to the other, but this does not necessarily indicate that one causes the other.