Real business cycle and new Keynesian models disagree upon
a. whether people form their expectations rationally.
b. whether changes in unemployment are voluntary or involuntary.
c. whether individuals engage in optimizing behavior at all times.
d. whether changes in the money supply affect output in the long-run.
B
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Refer to the figure above. If there is wage rigidity in the market, how much unemployment is created when the labor demand curve shifts to LD2?
A) 20 units of labor B) 30 units of labor C) 10 units of labor D) 40 units of labor
Which of the following generally occurs when a central bank pursues contractionary monetary policy?
A) the central bank purchases bonds and the interest rate increases. B) the central bank purchases bonds and the interest rate decreases. C) the central bank sells bonds and the interest rate increases. D) the central bank sells bonds and the interest rate decreases.