« previous next »

Author Question: How might real business cycle theorists respond to evidence of procyclical inflation? What will ... (Read 32 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?

Human kidneys will clean about 1 million gallons of blood in an average lifetime.

Did you know?

Many of the drugs used by neuroscientists are derived from toxic plants and venomous animals (such as snakes, spiders, snails, and puffer fish).

Did you know?

As the western states of America were settled, pioneers often had to drink rancid water from ponds and other sources. This often resulted in chronic diarrhea, causing many cases of dehydration and death that could have been avoided if clean water had been available.

Did you know?

To maintain good kidney function, you should drink at least 3 quarts of water daily. Water dilutes urine and helps prevent concentrations of salts and minerals that can lead to kidney stone formation. Chronic dehydration is a major contributor to the development of kidney stones.

Did you know?

The term bacteria was devised in the 19th century by German biologist Ferdinand Cohn. He based it on the Greek word "bakterion" meaning a small rod or staff. Cohn is considered to be the father of modern bacteriology.

(a) Age of maturity of Atlantic cod decreased during the fishery collapse. (b) Evidence of maturatio (a) Age of maturity of Atlantic cod decreased during the fishery collapse. (b) Evidence of maturatio
A closer look at the citric acid cycle A closer look at the citric acid cycle
RNA Virus Life Cycle RNA Virus Life Cycle
Ovulation Process The two ovaries alternate ovulation in each monthly cycle. Ovulation Process The two ovaries alternate ovulation in each monthly cycle.
Schematic view of the Calvin cycle Schematic view of the Calvin cycle
Biology cycle reference Biology cycle reference
Video: Cardiac Cycle (Part 4 of 4)

For a complete list of videos, visit our video library