indicate whether it's true, false or uncertain and explain the reason. A.2 While we have lots...

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A.2 While we have lots of data on labour markets and the capital stock, we economists still need to rely on filters, like that proposed by Hodrick and Prescott, to calculate the business cycle.

indicate whether it's true, false or uncertain and explain the reason.

business economics

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Answer 1

Answer #1

True

Reason: The Hodrick Prescott filter is used as a data smoothening technique to smoothen out short term business cycle fluctuations. Once these fluctuations are corrected, they reveal long term fluctuations in business cycles and thus make business cycle calculations easier. This is why the Hodrick Prescott filter is commonly used to calculate business cycles as it is easy to use and analyze.

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