A Government Policy That Is Consistent with Real Business Cycle

question 9

Multiple Choice

A government policy that is consistent with real business cycle theory would be for

• A) government to vary its spending in response to shocks to total factor productivity.
• B) the monetary authority to expand and contract the nominal money supply in response to shocks to total factor productivity.
• C) government to smooth out tax distortions over time.
• D) government to vary its lump-sum tax collections in response to changes in total factor productivity.

---

Definitions:

Abstract Concepts

Ideas or thoughts that do not have a physical or tangible representation, often complex and non-concrete.

Sensorimotor

A developmental stage in young children identified by Piaget, where they learn to perceive the world and control their movements through sensory and motor activity.

Cognitive Development

Refers to the process by which a child learns to reason, solve problems, and adapt to the environment, heavily influenced by Jean Piaget's theories.

Motor Abilities

The capacity of an individual to perform movements of the muscles with optimum speed, strength, and accuracy.