The Real-Business-Cycle Theory

question 84

Multiple Choice

The real-business-cycle theory

• A) is a monetarist view of the business cycle.
• B) is the mainstream view of the business cycle.
• C) assumes that the supply of money is constant.
• D) says that macro instability results from shifts in the long-run aggregate supply curve.

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Definitions:

Expected Value Analysis

A form of analysis that assigns likelihoods (probabilities) to various inputs, thus incorporating uncertainty directly into the output (answer).

Probabilities

A measure representing the likelihood or chance of certain events occurring, expressed as a number between 0 and 1.

Uncertainty

A lack of definite knowledge or predictability about outcomes, often factored into decision-making and risk assessments.

Present Value Index

An index computed by dividing the total present value of the net cash flow to be received from a proposed capital investment by the amount to be invested.