In the Real Business Cycle Model, a Persistent Increase in Total

question 27

Multiple Choice

In the real business cycle model, a persistent increase in total factor productivity

• A)has no effect on the real interest rate.
• B)has a theoretically ambiguous effect on the nominal interest rate.
• C)unambiguously increases the real interest rate.
• D)unambiguously decreases the real interest rate.
• E)has a theoretically ambiguous effect on the real interest rate.

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Definitions:

Par Value

The face value of a bond or stock, typically the amount paid at maturity for bonds and the nominal value for stocks.

Government Bonds

Debt securities issued by a government to support government spending and obligations.

General Level

Typically refers to the overall state or condition of something, often used in discussions about prices, economic conditions, or the level of activity in a market.

Convertibles

Securities, usually bonds or preferred shares, that can be converted into a specific number of shares of the issuing company's common stock.