Real-Business-Cycle Theory Suggests That Changes in

question 1

Multiple Choice

Real-business-cycle theory suggests that changes in

• A) monetary policy are the single most important cause of macroeconomic instability.
• B) investment spending will have a direct and significant effect on aggregate demand.
• C) technology and resources affect productivity, and thus the long-run growth of aggregate supply.
• D) the velocity of money is gradual and predictable, and thus is able to accommodate the long-run changes in nominal GDP.

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Definitions:

Reliable

The consistency of a measure or instrument, indicating the same results are achieved under consistent conditions.

Standardized

Made consistent in form, procedure, or conditions, often for the purpose of comparison or assessment.

Valid

Well-founded on evidence and corresponds accurately to the real world.

Cognitive Capacities

The various abilities related to the process of knowing, including reasoning, memory, attention, and language.