According to Real Business Cycle Theory

question 32

Multiple Choice

According to Real Business Cycle theory,

• A) lack of consumer confidence causes most business cycles
• B) price fluctuations are unimportant because they affect nominal, not real GDP
• C) recessions are an optimal response to negative technology shocks
• D) fiscal policy is the most appropriate way to smooth out economic fluctuations
• E) labor supply curves are extremely steep

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Definitions:

Time To Expiration

The period that remains before a contract, such as an option or futures contract, reaches its maturity date and is either exercised or expires worthless.

Intrinsic Value

Intrinsic value is the perceived or calculated true value of an asset, investment, or company, based on underlying perceptions of its true worth rather than current market value or price.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.

Actual Value

The actual value is the genuine, intrinsic value of an asset, without any speculation or market influence; often considered the most accurate value of an asset.