RBC ACTUAL TEST QUESTIONS WITH
COMPLETE SOLUTION PREMIUM REVIEW
CONTENT
●● Output (Y) formula
Answer: Y = C + I + G + (X -M)
●● Pro-cyclical
Answer: Positive correlation with output e.g. consumption, investment,
employment and real wages (weak), productivity
●● Counter-cyclical
Answer: Negative correlation e.g. unemployment
●● Acyclical
Answer: Weak or no correlation with output e.g. capital stock, real
wages
●● Walrasian model
Answer: Competitive markets, flexible prices, no externalities, no
imperfections/friction
, ●● RBC theory assumptions
Answer: Walrasian model, include shocks and allow for cariation in
employment/hours worked, no money
●● Drivers of fluctuations in RBC
Answer: Mostly technology shocks, and shocks to government spending
●● Capital accumulation/resource constraint
Answer: = K + [Y - C - G] - dK
●● Labour and capital are paid
Answer: their marginal products.
●● Real wage
Answer: w = MPL = dY/dL
●● real interest rate
Answer: r = MPK - capital depreciation (delta) = dY/dK - delta
●● Discount rate
Answer: e^-pt, higher p more impatient
COMPLETE SOLUTION PREMIUM REVIEW
CONTENT
●● Output (Y) formula
Answer: Y = C + I + G + (X -M)
●● Pro-cyclical
Answer: Positive correlation with output e.g. consumption, investment,
employment and real wages (weak), productivity
●● Counter-cyclical
Answer: Negative correlation e.g. unemployment
●● Acyclical
Answer: Weak or no correlation with output e.g. capital stock, real
wages
●● Walrasian model
Answer: Competitive markets, flexible prices, no externalities, no
imperfections/friction
, ●● RBC theory assumptions
Answer: Walrasian model, include shocks and allow for cariation in
employment/hours worked, no money
●● Drivers of fluctuations in RBC
Answer: Mostly technology shocks, and shocks to government spending
●● Capital accumulation/resource constraint
Answer: = K + [Y - C - G] - dK
●● Labour and capital are paid
Answer: their marginal products.
●● Real wage
Answer: w = MPL = dY/dL
●● real interest rate
Answer: r = MPK - capital depreciation (delta) = dY/dK - delta
●● Discount rate
Answer: e^-pt, higher p more impatient
