An Important Critique of Real Business Cycle Theory Is That

question 34

Multiple Choice

An important critique of real business cycle theory is that during a recession,

• A) there is overutilization of labour and overutilization of the aggregate capital stock.
• B) there is underutilization of labour and underutilization of the aggregate capital stock.
• C) there is overutilization of labour and the wage rate is constant.
• D) there is underutilization of labour and the real wage decreases.
• E) there is underutilization of labour and total factor productivity increases.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.