« previous next »

Author Question: How might real business cycle theorists respond to evidence of procyclical inflation? What will ... (Read 42 times)

ashley

  • Hero Member
  • *****
  • Posts: 584
on: Jun 30, 2018
How might real business cycle theorists respond to evidence of procyclical inflation?
 
  What will be an ideal response?

Question 2

Consider the two graphs above. Suppose that financial liberalization enables more businesses to access credit markets. This would ________ the desired level of the capital stock, as depicted in graph ________.
 
  A) increase; B
  B) increase; A
  C) decrease; B
  D) decrease; A


prumorgan

  • Sr. Member
  • ****
  • Posts: 326
Reply #1 on: Jun 30, 2018
Answer to Question 1

Since the aggregate demand curve is negatively-sloped, changes in potential output should relate negatively to inflation. Rising potential (actual) output should put downward pressure on prices, while negative productivity shocks should force prices up. Defenders of real business cycle theory may point to evidence that inflation is not consistently procyclical. Also, if aggregate demand shifts are correlated with changes in potential output, that might account for procyclical changes in inflation.

Answer to Question 2

A


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Studies show that systolic blood pressure can be significantly lowered by taking statins. In fact, the higher the patient's baseline blood pressure, the greater the effect of statins on his or her blood pressure.

Did you know?

The oldest recorded age was 122. Madame Jeanne Calment was born in France in 1875 and died in 1997. She was a vegetarian and loved olive oil, port wine, and chocolate.

Did you know?

GI conditions that will keep you out of the U.S. armed services include ulcers, varices, fistulas, esophagitis, gastritis, congenital abnormalities, inflammatory bowel disease, enteritis, colitis, proctitis, duodenal diverticula, malabsorption syndromes, hepatitis, cirrhosis, cysts, abscesses, pancreatitis, polyps, certain hemorrhoids, splenomegaly, hernias, recent abdominal surgery, GI bypass or stomach stapling, and artificial GI openings.

Did you know?

Since 1988, the CDC has reported a 99% reduction in bacterial meningitis caused by Haemophilus influenzae, due to the introduction of the vaccine against it.

Did you know?

As many as 20% of Americans have been infected by the fungus known as Histoplasmosis. While most people are asymptomatic or only have slight symptoms, infection can progress to a rapid and potentially fatal superinfection.

The hair cycle The hair cycle
Conversion of pyruvate to acetyl CoA, the junction between glycolysis and the citric acid cycle. Conversion of pyruvate to acetyl CoA, the junction between glycolysis and the citric acid cycle.
Krebs Cycle Krebs Cycle
Reactions of the glyoxylate cycle Reactions of the glyoxylate cycle
The hydrologic cycle "الدورة الهيدرولوجية" The hydrologic cycle "الدورة الهيدرولوجية"
Early geologists discovered evidence of past glaciations in U-shaped valleys Early geologists discovered evidence of past glaciations in U-shaped valleys
Video: What are the Parts of a Plant Cell?

For a complete list of videos, visit our video library