Research on productivity shocks has shown that
A)productivity shocks have only nominal effects.
B)there have been no identifiable productivity shocks in the U.S. economy since World War II.
C)small productivity shocks can explain large business cycle fluctuations.
D)large productivity shocks produce only small deviations in aggregate output.

Question

Quizplus · Accepted Answer

Research on productivity shocks suggests that even small productivity shocks can explain large business cycle fluctuations. This implies that productivity shocks have a significant impact on aggregate output and macroeconomic performance, contrary to option A and D. Additionally, while there have not been many identifiable productivity shocks since World War II (option B), this does not negate the positive effect of productivity shocks on the economy when they do occur.

Research on Productivity Shocks Has Shown That