The Basic Classical Model Can Account for the Procyclical Behaviour

question 44

Multiple Choice

The basic classical model can account for the procyclical behaviour of money if there

• A)are real business cycles caused by productivity shocks.
• B)is reverse causation from future output to money.
• C)are rational expectations among the public.
• D)are propagation mechanisms in the economy.

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Definitions:

Pepsi

A carbonated soft drink produced and manufactured by PepsiCo, known worldwide and serving as a major competitor to Coca-Cola.

Pizza

A popular dish of Italian origin consisting of a flat round base of dough topped with tomatoes, cheese, and various other ingredients, baked quickly.

Trade-off

A case where the gain of one property or aspect comes at the cost of losing another.

Budget Constraints

Refers to the limitations on the consumption choices of individuals or entities due to their available resources, such as income or wealth.