How Do RBC Economists Face the Business Cycle Fact That

question 71

Multiple Choice

How do RBC economists face the business cycle fact that inflation is procyclical?

• A)They argue that even though inflation doesn't fit their theory, everything else does, and inflation is not important.
• B)They note that inflation would not be procyclical if monetary policy were conducted properly.
• C)They argue that inflation is procyclical only because monetary policy shocks are the main cause of business cycles.
• D)They use alternative statistical methods that suggest that inflation is countercyclical.