Author Question: According to real business cycle models, A) the economy is normally at potential GDP. B) ... (Read 116 times)

lilldybug07 · **on:** Jun 29, 2018

According to real business cycle models,

A) the economy is normally at potential GDP.
B) unexpected changes in monetary policy are the major source of fluctuations in real GDP.
C) the long-run Phillips curve is negatively sloped.
D) the economy is normally operating below the natural rate of unemployment.

Question 2

You agree to lend 1,000 for one year at a nominal interest rate of 10. You anticipate that inflation will be 4 over that year. If inflation is instead 3 over that year, which of the following is true?

A) The person who borrowed the 1,000 will be worse off as a result of the unanticipated decrease in inflation.
B) The real interest rate you earn on your money will be negative.
C) The purchasing power of the money that will be repaid to you will be lower than you expected.
D) The real interest rate you earn on your money is lower than you expected.