The Real Business Cycle Theory States That

question 5

Multiple Choice

The real business cycle theory states that

• A)changes in money supply result in output fluctuations
• B)labor supply is highly elastic in response to permanent changes in the real wage rate
• C)the most important economic disturbances arise from supply shocks or unanticipated changes in productivity
• D)firms are reluctant to change prices due to the menu costs involved
• E)a change in labor productivity will not have a long-lasting effect on real output

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Definitions:

Policy

A deliberate system of principles to guide decisions and achieve rational outcomes, often enacted by an organization or government.

Dividends

Profits distributed by a company to its shareholders, usually derived from the company's earnings.

Market Price

The present cost at which a service or asset is available for purchase or sale in the market.

Expected Dividend Rate

An estimate of the yearly dividend per share that a company plans to pay out to its shareholders.