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Economic Theories of Business Cycles Quiz

#1

Which economist is associated with the concept of the 'invisible hand' and the idea that markets are self-regulating?

Adam Smith
Explanation

Adam Smith introduced the concept of the invisible hand and market self-regulation.

#2

Which economic theory suggests that business cycles are caused by changes in technological progress and innovation?

Real business cycle theory
Explanation

Business cycles driven by technological changes.

#3

According to the classical theory of business cycles, what is the primary cause of economic fluctuations?

Changes in technology
Explanation

Technology as the main driver of economic fluctuations.

#4

Which economic theory emphasizes the role of monetary policy in influencing business cycles and argues that changes in the money supply have a significant impact on economic fluctuations?

Monetarist theory
Explanation

Monetary policy's crucial role in economic fluctuations according to monetarists.

#5

In the context of business cycles, what is 'stagflation' characterized by?

High inflation and high unemployment
Explanation

Stagflation involves simultaneous high inflation and unemployment.

#6

What is the primary focus of New Keynesian economics in explaining business cycles?

Monetary policy
Explanation

New Keynesian economics emphasizes monetary policy in explaining cycles.

#7

According to monetarist theory, what is the primary driver of business cycles?

Changes in the money supply
Explanation

Monetarist theory emphasizes money supply changes as primary drivers.

#8

Which economist is known for the idea that 'animal spirits' influence economic decision-making and contribute to business cycles?

John Maynard Keynes
Explanation

Keynes emphasized 'animal spirits' in economic decision-making.

#9

Which economist is known for the theory that business cycles are primarily driven by changes in aggregate demand, and advocated for government intervention to stabilize the economy?

John Maynard Keynes
Explanation

Keynesian theory emphasizes demand-driven cycles and government intervention.

#10

In the context of business cycles, what is the 'Phillips curve' primarily associated with?

Inflation and unemployment
Explanation

Phillips curve links inflation and unemployment rates.

#11

According to the Austrian business cycle theory, what is the main driver of business cycles?

Changes in interest rates
Explanation

Austrian theory highlights interest rate changes as the key driver.

#12

Which economic theory suggests that business cycles are a result of self-adjusting markets and that government intervention only exacerbates the problem?

Austrian economics
Explanation

Austrian economics emphasizes market self-adjustment and criticizes government intervention.

#13

Which economic theory suggests that business cycles are mainly caused by external shocks to the economy, such as changes in oil prices or technological advancements?

Real business cycle theory
Explanation

External shocks drive business cycles in real business cycle theory.

#14

In the context of business cycles, what is 'creative destruction' associated with?

Innovation and economic growth
Explanation

Creative destruction involves innovation and growth.

#15

According to Real Business Cycle (RBC) theory, what is the primary driver of economic fluctuations?

Technological shocks
Explanation

Technological shocks drive economic fluctuations in RBC theory.

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