Critics of Real Business Cycle Models Argue That

question 52

Multiple Choice

Critics of real business cycle models argue that

• A) the model works only under conditions of inflexible wages and prices.
• B) its proponents fail to identify supply shock events that could be used to explain most of the actual booms and recessions.
• C) the theory places too much emphasis on fluctuations in the money supply and its velocity of circulation.
• D) only the Great Depression of the 1930s fits the real business cycle theory closely.
• E) its assumption of a vertical long-run aggregate demand curve does not conform to either sound economic theory or empirical evidence.

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Definitions:

Rigidity

The lack of flexibility or adaptability in processes, systems, or organizations that can hinder responsiveness and innovation.

Flexibility

The ability of a system, process, or entity to adapt to changes or demands without significant detriment or loss of functionality.

Consolidate Manufacturing

The process of centralizing or combining the production operations and facilities to improve efficiency and reduce costs.

Flexible Technology

Systems or equipment that can easily adapt to changes in production volume, design, or process, enhancing a company's ability to respond to market changes.