Both the New Classical and New Keynesian Business Cycle Theories

question 103

Multiple Choice

Both the new classical and new Keynesian business cycle theories agree that

• A) expected changes in aggregate demand lead to the business cycle.
• B) unexpected changes in aggregate demand cannot result in a business cycle.
• C) the money wage rate is influenced by rational expectations of the price level.
• D) the long-term nature of wage contracts allow expected changes in the price level to cause business cycles.

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Definitions:

Systematic Desensitization

A behavioral therapy technique used to reduce phobia and anxiety through gradual exposure to the feared object or situation combined with relaxation techniques.

Extinction

In behavioral psychology, the gradual weakening of a conditioned response that results in the behavior decreasing or disappearing.

Transformational Grammar

A theory of grammar that focuses on the syntactic transformations that relate surface structures and deep structures in language.

Surface Structure

In linguistics, the outward form of a sentence which can vary without changing its underlying meaning.