Question

In: Economics

In real business cycle theory, the persistence of shocks to total factor productivity is justified by

In real business cycle theory, the persistence of shocks to total factor productivity is justified by


a

the fact that capital takes time to build.

b

the fact that capital depreciates every period.

c

the behavior of Solow residuals in the data.

d

the fact that monetary policy can be neutral.

Solutions

Expert Solution

The answer is C). the behavior of Solow residuals in the data.

The monetary theory states that the business cycle is a result of changes in monetary and credit market conditions. Hawtrey, the main supporter of this theory, advocated that business cycles are the continuous phases of inflation and deflation.

Rahul Sunny answered 2 years ago
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