The real business cycle model begins with the assumption that ...

[CBme]

The real business cycle model begins with the assumption that ________.
 
  A) wages and prices are sticky
  B) wages and prices are completely flexible
  C) the velocity of money is a constant
  D) nominal variables are superior to real variables in describing economic activity

Question 2

As an investor, negative supply shocks are not attractive because ________.
 
  A) they tend to lead to lower productivity
  B) the real rental price of capital tends to decline driving rental incomes down
  C) with decreases in expected income, claims on those incomes also tend to fall leading to stock market downturns
  D) all of the above
  E) none of the above

[ebe]

Answer to Question 1

B

Answer to Question 2

D