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What is the evidence for the view that the U.S. business cycle has become less severe after 1950
Question 1: Business cycles and facts.
1) What is the evidence for the view that the U.S. business cycle has become less severe after 1950, especially after 1984? Briefly discuss the reasons.
2) What terms are used to describe the direction and timing of the movement of an economic variable relative to the business cycle? Explain.
3) Discuss briefly the business cycle facts (direction and timing) in the U.S regarding to industrial production, residential investment, inflation, labor productivity, real wage, and employment.
The IS-LM / AD-AS models. 4) What is the IS curve? Derive the IS curve graphically. How would an increase in government purchases affect the IS curve?
5) Use the IS-LM model to explain briefly the impact of a temporary positive technology shock on employment, real wage, labor productivity, unemployment, output, and price level.
6) Use the IS-LM model to explain briefly the impact of a temporary increase in government purchases on employment, real wage, labor productivity, unemployment, output, and price level.
7) Define monetary neutrality. Show that, after prices adjust completely, money is neutral in the AD-AS model (or in the IS-LM model). What are the classical and Keynesian views about whether money is neutral in the short run? In the long run?
8) What major business cycle facts does the Real Business Cycle (RBC) theory explain successfully? Does it explain any business cycle facts less well?
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