In real business cycle theory,the persistence of shocks to total factor productivity is justified by
A) the fact that some capital depreciates every period.
B) the behavior of Solow residuals.
C) the fact that Taylor rules have been used in post-war United States.
D) the fact that capital takes some time to build.

Question

Quizplus · Accepted Answer

The persistence of shocks to total factor productivity in real business cycle theory is justified by the behavior of Solow residuals, which show that productivity shocks tend to have lasting effects.

In Real Business Cycle Theory,the Persistence of Shocks to Total