Critics of real business cycle analysis suggest that the persuasiveness of the model may be limited by the existence of ________.
A)flexible wages and prices
B)rising wages
C)voluntary unemployment
D)labor hoarding

Question

Quizplus · Accepted Answer

Real business cycle analysis assumes that all unemployment is voluntary and that markets clear. Labor hoarding, where firms retain more workers than needed during downturns, contradicts this assumption, suggesting that unemployment may not be entirely voluntary.

Critics of Real Business Cycle Analysis Suggest That the Persuasiveness