If the utilization rates of capital and labor are procyclical,then
A)output will rise in recessions and decline in expansions.
B)measured productivity will be constant.
C)the Solow residual will be procyclical.
D)prices will be countercyclical.

Question

Quizplus · Accepted Answer

The Solow residual, a measure of productivity that accounts for changes in output not explained by labor and capital, tends to be procyclical because it increases during expansions (when utilization rates of capital and labor are high) and decreases during recessions.

If the Utilization Rates of Capital and Labor Are Procyclical,then