The random walk of GDP theory argues that if the effect of a shock to the economy is permanent, it must come from
A)an unanticipated monetary policy change
B)a misguided fiscal policy change
C)irrational expectations
D)the supply side and not the demand side
E)the demand side and not the supply side

Question

Quizplus · Accepted Answer

The random walk of GDP theory suggests that if the effect of a shock to the economy is permanent, it must come from the supply side and not the demand side. This means that supply-side shocks, such as advancements in technology or changes in productivity, have a more lasting impact on the economy than demand-side shocks, such as changes in consumer or government spending. Therefore, option D is the best choice.

The Random Walk of GDP Theory Argues That If the Effect