Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?
A)Business cycles are always and everywhere a monetary phenomenon.
B)Wars and military buildups could be considered productivity shocks.
C)Business cycles could be caused by the accumulation of small productivity shocks.
D)Business cycles are often caused by unobservable productivity shocks, which aren't apparent at the time they occur.

Question

Quizplus · Accepted Answer

The RBC model argues that business cycles can be caused by the accumulation of small productivity shocks rather than relying on one large shock. This addresses the criticism that it is hard to find productivity shocks large enough to cause business cycles.

Critics of the RBC Approach Argue That It's Hard to Find