Economics - Economics Section 2

16. Which of the following business cycle models suggests that government should not intervene with monetary and fiscal policy?

  • Option : A
  • Explanation : The recommended policy of the Neoclassical model is that government should not intervene with monetary and fiscal policy.
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17. Monetarists advocate a very limited role for the government because they believe:

  • Option : B
  • Explanation : Monetarists believe that policy effects typically occur long after the need for which they were implemented. By the time the policy has an impact the original issue might no longer be relevant.
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18. According to the RBC model, which of the following most likely causes persistent unemployment?

  • Option : B
  • Explanation : According to the RBC theory, changes in output and unemployment are caused by real economic variables and not by monetary variables such as inflation.
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19. Which of the following concepts was covered by the Austrian school of thought, but not by the Neoclassical school of thought to explain the business cycle?

  • Option : B
  • Explanation : The Austrian school shared some views with the Neoclassical school but also addressed two additional areas: 1) role of government and 2) money as a medium of exchange.
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