Question

1)Keynes suggested that:

A) money is the prime factor affecting aggregate supply.

B) money is the prime factor affecting aggregate demand.

C) a variety of factors affect aggregate supply.

D) a variety of factors affect aggregate demand.

2) The real business cycle theorists say that changes in total factor productivity are totally the result of:

A) depressions.

B) shifts in aggregate supply.

C) shifts in aggregate demand.

D) uneven technological progress.

3)The political business cycle refers to policies that:

A) slow down the economy in election years.

B) keep the economy on a constant growth path.

C) speed the economy up in election years.

D) run surpluses in election years.

Answer 1

1)Keynes suggested that:

D) a variety of factors affect aggregate demand.

Reason: As per Keynes, a variety of factors affect AD, which includes consumption, investment, government expenditure and net exports. these factors together make up the AD function equation

2) The real business cycle theorists say that changes in total factor productivity are totally the result of:

D) uneven technological progress.

Reason: As per real business cycle theorists, technological shocks or uneven technological growth affect business cycle volatilities in the economy, which affect total factor productivity and thus lead to business cycles in the economy.

3)The political business cycle refers to policies that:

C) speed the economy up in election years.

Reason: Political business cycles show the impact of political actors manipulating the economy just before elections to speed up the economy, so as to be able to present a good picture to the voters to gain more votes in the upcoming elections.