The flaw of the Real Business Cycle model is that it
A)assumes away output fluctuations.
B)assumes complete wage rigidity.
C)assumes unrealistic fooling of workers.
D)requires procyclical wage movements and continuous labor market equilibrium.

Question

Quizplus · Accepted Answer

The Real Business Cycle (RBC) model assumes that the labor market is always in equilibrium and that wages move in a procyclical manner, meaning they increase during economic expansions and decrease during recessions. This assumption is often criticized for not accurately reflecting real-world labor market dynamics, where wages can be sticky and labor markets do not always clear instantly.

The Flaw of the Real Business Cycle Model Is That