An Important Critique of Real Business Cycle Theory Is the Belief

question 22

Multiple Choice

An important critique of real business cycle theory is the belief that cyclical movements in total factor productivity

• A) rarely occur.
• B) may, in part, be an artifact of measurement error.
• C) lead to imperceptible changes in labour demand.
• D) are too small to account for the size of fluctuations in real GDP.
• E) does not explain the overall fluctuations in the business cycle.

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Definitions:

Weighted-Average Method

A method for valuing inventory that calculates the cost of inventory based on the average cost of all comparable items available throughout the period, adjusted by their weighted importance.

Process Costing

An accounting methodology used for homogeneous products, attributing costs to units of product on an average basis.

Conversion Costs

Conversion costs are the costs incurred to convert raw materials into finished goods, and typically include direct labor and manufacturing overhead expenses.

Weighted-Average Method

A costing method for inventory that determines the cost of goods sold and the remaining inventory value by averaging the costs of all available units for sale throughout the period.