Which of the business cycle facts below cannot be explained unquestionably by the Real Business Cycle model?
A)The average labour productivity is procyclical.
B)Employment is procyclical.
C)Inflation slows down during or immediately after recession.
D)Recurrent fluctuations in aggregate output.

Question

Quizplus · Accepted Answer

The Real Business Cycle model predicts that inflation should be countercyclical, meaning that it should rise during recessions and fall during booms. Therefore, the fact that inflation slows down during or immediately after a recession cannot be explained unquestionably by this model.

Which of the Business Cycle Facts Below Cannot Be Explained