Which of the following CORRECTLY describes the new classical cycle theory of the business cycle
A. An expected tax rate change can trigger a business cycle.
B. An unexpected change in the quantity of money can trigger a business cycle.
C. Rational expectations keep the money wage from changing quickly.
D. An unexpected change in the price of oil can trigger a business cycle.
Answer: B. An unexpected change in the quantity of money can trigger a business cycle.
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Suppose the market clearing price is $15 and the price ceiling is $17. The price that prevails in the market will be
A) $17. B) $15. C) less than $15. D) more than $17.
A country which does not devalue when financial markets expect it to will probably suffer
A) a real appreciation of its currency. B) higher interest rates. C) a default on its national debt. D) all of the above E) none of the above