According to the real business cycle theory, which of the following is a TRUE statement about the effects of an oil shock in the 1970s?
A) Relative prices changed but there was no impact on the price level in general.
B) The natural rate of unemployment remained unchanged, but employment levels did decline.
C) The shock shifted the short-run aggregate supply curve but not the long-run aggregate supply curve.
D) The shock affected real variables only and did not affect nominal variables.
B
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In contrast to previous eras, a significant change seen today is that no model of government
a. is viewed as a good alternative to democracy. b. can successfully overthrow all vestiges of autocratic rule. c. is associated with a significant wealth gap. d. can compete with the power of individual citizens.
The Maastricht rules specified budgetary rules such as meeting deficit and debt targets because:
A) nations that are able to keep spending down will probably have more money left over to pay their Eurozone dues. B) nations that are fiscally sound will not be tempted to inflate their currency to reduce the real burden of their debt. C) if one nation spends more and taxes less, population will tend to emigrate to that nation. D) the ECB is prohibited from lending to nations, that nation may run out of available credit.