The real business cycle model best explains the procyclicality of the nominal money by
A) an unpredictable Bank of Canada.
B) exogenous money.
C) endogenous money.
D) uncorrelated money.
E) monetary neutrality.

Question

Quizplus · Accepted Answer

The real business cycle model assumes that changes in the money supply are endogenous, meaning that they are determined by the behavior of individuals and firms in response to economic incentives. As a result, changes in the nominal money supply are procyclical, meaning that they tend to rise in booms and fall in recessions, consistent with the empirical evidence.

The Real Business Cycle Model Best Explains the Procyclicality of the Nominal