The Real Business Cycle Theory Is Based on All of the Assumptions

question 27

Multiple Choice

The real business cycle theory is based on all of the assumptions below EXCEPT

• A) the absence of rationality among people.
• B) flexible wages.
• C) pure competition.
• D) flexible prices.

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Definitions:

Horizon Analysis

A method used in finance to assess the potential performance of an investment over a specific period.

Reinvestment Rate

The rate at which an investor plans to reinvest interest or dividend income from an investment.

Zero-Coupon Bonds

Bonds that don't pay periodic interest payments, but are sold at a discount from their face value and mature at that face value.

Expected Interest Rate

The anticipatory rate at which interest is projected to be applied on borrowed funds or received on investments.