The Real Business Cycle (RBC) Model Implies That

question 66

Multiple Choice

The real business cycle (RBC) model implies that:

• A) business cycles are driven by real shocks to the economy.
• B) real output fluctuates as a result of demand shocks only.
• C) the rate of inflation is closely linked to the long-run rate of output growth.
• D) business cycles are the result of fluctuations in the money supply.

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Definitions:

Net Present Value

Net present value is a financial calculation that determines the worth of a project or investment by discounting its future cash flows to the present value using a specific discount rate, to assess its profitability.

Present Value Factor

A coefficient used to calculate the present value of a future amount of money or stream of cash flows given a specific rate of return.

Cash Flows

The net amount of cash being transferred into and out of a business, illustrating its ability to generate and use cash.

Incremental Analysis

An examination of the additional benefits and costs of certain business decisions.