In Real Business Cycle Theory, a Decrease in Productivity Leads

question 8

Multiple Choice

In real business cycle theory, a decrease in productivity leads to all of the following events EXCEPT

• A)a decrease in the demand for labour.
• B)a decrease in the demand for loanable funds.
• C)a rise in the real wage rate.
• D)a fall in the real interest rate.
• E)a decrease in the supply of labour.

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Definitions:

Collateral

Assets that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid according to the agreed upon terms.

Cash Flows

The full extent of money transactions processed by a business, considerably affecting its ability to liquidate assets.

Financial Assets

Assets that derive value because of a contractual claim, such as stocks, bonds, bank deposits, and other investments.

Future Cash Flows

The projected income and expenditures that a company expects to generate over a forthcoming period.