An alternative to Prescott's explanation of the cyclical behavior of the Solow residual is that it is the result of:
A) labor hoarding in recession and cyclical mismeasurement of output.
B) bad weather, strict environmental regulations, and oil shocks.
C) declines in capital utilization and labor force participation.
D) technology shocks.

Question

Quizplus · Accepted Answer

Labor hoarding and cyclical mismeasurement of output can lead to fluctuations in the Solow residual, providing an alternative explanation to Prescott's focus on technology shocks.

An Alternative to Prescott's Explanation of the Cyclical Behavior of the Solow