According to Real Business Cycle Theory, If the Bank of Canada

question 65

Multiple Choice

According to real business cycle theory, if the Bank of Canada increases the quantity of money when real GDP decreases, real GDP

• A)will increase but only temporarily.
• B)and the price level will both be unaffected.
• C)will increase permanently.
• D)will be unaffected, but the price level will rise.
• E)will decrease due to the inefficiencies introduced into production as a result.

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Definitions:

Public Choice Theory

An economic theory that studies how public decisions are made and how public policies are shaped, considering individuals as self-interested agents.

Political Candidate

An individual who offers themselves for public office by participating in electoral campaigns to win an election.

Personal Benefits

Advantages or gains that accrue directly to an individual as a result of an action or investment.

Public Choice Theory

A framework that applies economic principles to the analysis of political behavior, emphasizing the self-interest of voters, politicians, and bureaucrats.