When RBC economists compare the correlations in their models to the data, what are they looking at?
A. The amount of random variation in economic variables
B. The degree to which different economic variables move together
C. The strength of procyclicality of different variables
D. The degree to which variables lead output over the business cycle
Answer: B
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The actual real wage must be below the equilibrium real wage in order to encourage firms to produce at any output level above the natural rate
Once workers realize this situation, their expected price level will gradually rise and they will demand a higher nominal wage. This description of a business cycle adjustment is part of which of the following theories? A) Classical model B) original Keynesian model C) Friedman fooling model D) the RBC model
Which of the following can be measured by the level of real GDP per person?
a. productivity and the standard of living b. productivity but not the standard of living c. the standard of living but not productivity d. neither the standard of living nor productivity