QUESTION-4

A)

a) Use graphs to differentiate and explain between procyclical, countercycle and acyclical co-movements.

b) Explain the statistical tool used to define volatility, cyclical movements, lead and lag of series.

c) Differentiate between regular business cycle and real business cycle.

d) In the overlapping generation model, the elasticity of consumption with respect to the technology is less than the elasticity of investment with respect to the technology. Interpret the above result in terms of real business cycle theory. Elasticities are the relative changes in consumption and investment whereas, the absolute change in consumption is larger than the change in investment. Comment on this statement.

B)

i. List variables those show procyclical, counter cyclical and acyclical behavior.

ii. List variables those show lagging and leading behavior.