In the RBC model,supply shocks
A)are always favorable by definition,but come at irregular intervals.
B)are always adverse by definition,but come at irregular intervals.
C)alternate between favorable and adverse shocks.
D)follow demand shocks with the opposite effect on output.

Question

Quizplus · Accepted Answer

In the RBC model, supply shocks can alternate between being favorable or adverse. This is because supply shocks are unexpected changes in the technology or productivity of firms, which can either increase or decrease output in the economy depending on whether they improve or worsen the production process. Therefore, they do not always have a positive or negative effect on output, but can vary over time.

In the RBC Model,supply Shocks