Real Business Cycle Theory

question 12

Multiple Choice

Real business cycle theory:

• A) emphasizes only changes in tax rates.
• B) argues that shifts in consumption spending are responsible for fluctuations in output.
• C) ignores the effects of shocks to the production technology.
• D) argues that fluctuations in output are caused by technological change.

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Definitions:

Price Ceilings

A legal maximum price set below the equilibrium price for a good or service, aimed at preventing prices from becoming too high.

Equilibrium Price

The cost at which the amount of a product or service that consumers want to buy is equal to the amount that sellers want to sell, resulting in a balanced market.

Shortages

The situation where the demand for a product or service exceeds its supply in a market.

Price Ceiling

A government-imposed limit on the price charged for a product or service, intended to prevent prices from becoming too high.