One Potential Weakness of the Coordination Failure Model as an Explanation

question 22

Multiple Choice

One potential weakness of the coordination failure model as an explanation of business cycles is that

• A) evidence supporting intertemporal substitution as an important determinant of labour supply is weak.
• B) evidence supporting the existence of increasing returns at the aggregate level is weak.
• C) it fails to explain several of the key business cycle regularities.
• D) it requires that consumers not behave in a rational manner.
• E) the Bank of Canada does not use all available information.

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Definitions:

Telegraphic Speech

A stage in language acquisition during early childhood, where speech is concise and contains only essential content words, omitting smaller function words and inflections.

Infant-Directed Speech

A speech pattern used by adults when talking to babies, characterized by higher pitch, slower rate, and exaggerated intonation.

Satisfaction

The feeling of pleasure or fulfillment that comes from achieving one's goals or desires.

Economic Resources

The assets, capital, and means of production that are used to create goods and services within an economy.