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.

Question

Quizplus · Accepted Answer

During a recession, there is underutilization of labour and underutilization of the aggregate capital stock.

An Important Critique of Real Business Cycle Theory Is That