Critics of real business cycle models argue that
A) the model works only under conditions of inflexible wages and prices.
B) its proponents fail to identify supply shock events that could be used to explain most of the actual booms and recessions.
C) the theory places too much emphasis on fluctuations in the money supply and its velocity of circulation.
D) only the Great Depression of the 1930s fits the real business cycle theory closely.
E) its assumption of a vertical long-run aggregate demand curve does not conform to either sound economic theory or empirical evidence.

Question

Quizplus · Accepted Answer

Critics of real business cycle models argue that the proponents fail to identify supply shock events that could be used to explain most of the actual booms and recessions. This makes it difficult to apply the model to real-world situations.

Critics of Real Business Cycle Models Argue That