All else held constant, as the variance of a payoff increases, the

Real business cycle theory explains variations in prices, employment, and real Gross Domestic Product (GDP) by focusing on

A) changes in real variables such as supply shocks, technological changes, and shifts in the composition of the labor force. B) anticipated changes in fiscal policy enacted by the government. C) the effects of the Phillips curve. D) anticipated monetary policies enacted by the Fed.

If the Fed does not take into account the additional policy channels available in an open economy, then ________ when conducting contractionary monetary policy

A) it is likely to increase GDP too little and cause a recession B) it is likely to decrease GDP too little and inflation will persist C) it is likely to decrease GDP too much and cause a recession D) it is likely to increase GDP too much and inflation will persist