RBC models are said to reproduce some important relationships between variables over the U.S.business cycle. Identify one such relationship from the given options.
A)Output growth is closely related to growth in investment expenditure over the business cycle.
B)Over the course of the business cycle, consumption spending on physical capital grow less than the investment spending on physical capital.
C)Over the course of the business cycle, consumption spending on physical capital grow more than the investment spending on physical capital.
D)Output growth is closely related to growth in labor hours over the business cycle.

Question

RBC models are said to reproduce some important relationships between variables over the U.S.business cycle. Identify one such relationship from the given options.​
A)​Output growth is closely related to growth in investment expenditure over the business cycle.
B)​Over the course of the business cycle, consumption spending on physical capital grow less than the investment spending on physical capital.
C)​Over the course of the business cycle, consumption spending on physical capital grow more than the investment spending on physical capital.
D)​Output growth is closely related to growth in labor hours over the business cycle.

Quizplus · Accepted Answer

RBC models typically suggest that output growth is closely related to growth in labor hours over the business cycle. This is because changes in labor input are often the primary driver of changes in output levels. The other options are not consistent with typical RBC model predictions.

RBC Models Are Said to Reproduce Some Important Relationships Between