ECON330D2 Practice Exercises
Chapter 3 and 13 (RBC Model)
加拿大经济课业代写 The persistence of deviations in GDP from trend implies that the duration of recessions and expansions tend to be consistent.
Selected questions will be discussed by the TAs in conferences.
True, False or Uncertain. 加拿大经济课业代写
Determine whether the following statements are True, False or Uncertain and Justify your response.
- The persistence of deviations in GDP from trend implies that the duration of recessions and expansions tend to be consistent.
- Deviations from trend in real aggregate consumption are coincident with deviations from trend in real GDP and useful in predicting the deviations from trend in real GDP. 加拿大经济课业代写
- Deviations from trend in employment are procyclical, lagging and more variable than deviations from trend in real GDP.
- The real business cycle model implies that the government should smooth business cycles by increasing government spending when total factor productivity falls.
- The real business cycle is inconsistent with observations on the correlations between money and real output.
Numerical/Graphical Questions. 加拿大经济课业代写
(a) In the real business cycle model, suppose government spending increases temporarily.
Determine the equilibrium effect of this. Could business cycles be explained byfluctuations in G? that is, does the model replicate the key business cycle facts when subjected to temporary shock to government spending? Explain carefully.
(b) Suppose a natural disaster destroys some of the nation’s capital stock. The central bank’s goal is to stabilize the price level. Given this goal, what should the central bank do in response to the disaster? Explain with the aid of diagrams.
(c) Suppose the central bank observes a drop in real GDP but does not know what caused the drop. How would the central bank respond to if it believed that GDP dropped because of a decline in total factor productivity and that real business cycle theory is correct?
Explain your answer with the aid of diagrams.