Real business cycle theorists are critical of monetarist reduced-form evidence because they believe
A)money is the most important cause of changes in aggregate demand.
B)there is reverse causation from the business cycle to money.
C)there is reverse causation from money to the business cycle.
D)business cycles do not exist.

Question

Quizplus · Accepted Answer

Real business cycle theorists argue that the business cycle is primarily driven by real shocks to the economy, such as changes in productivity or technology, rather than changes in monetary policy. Therefore, they are critical of the monetarist view that money is the most important cause of changes in the business cycle. In addition, they argue that there is reverse causation from the business cycle to money, as fluctuations in economic activity can affect the demand for money.

Real Business Cycle Theorists Are Critical of Monetarist Reduced-Form Evidence