Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 10, Problem 3AP
To determine
To Evaluate: Effects on different economic variable under different condition using IS-LM model.
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Suppose you are interested in isolating the cyclical component of a macroeconomic time series (such as GDP ).
Give at least one reason why assuming a non linear trend would be preferable than assuming a linear trend.
According to the real business cycle theory, productivity shocks are an important source of business cycles. Using the Cobb–Douglas production function and annual data since 1961, calculate and graph U.S. total factor productivity. Use real GDP for Y, the capital stock from the source listed in Table 3.1 for K, and civilian employment for N. Look for periods marked by sharp changes up or down in productivity. How well do these changes match up with the dates of business cycle peaks and troughs?
According to the Real Business Cycle theory,
a) Business cycles are originated by changes
in real wages
b) Business cycles are originated by
productivity shocks
c) Business cycles are originated by demand
fluctuations
d) Business cycles are originated by the real
demand for money
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