According to real business cycle theorists,the tendency of money to lead output may be due to
A) government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date.
B) the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Federal Reserve's use of all available information in trying to stabilize the price level.
C) the Federal Reserve's use of all available information in trying to stabilize the price level and the Federal Reserve's use of all available information in trying to stabilize the level of economic activity.
D) the Federal Reserve's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in economic activity.

Question

Quizplus · Accepted Answer

Real business cycle theorists argue that the tendency of money to lead output is due to the expansion of bank loans in anticipation of real economic activity. They do not believe that government spending shocks are the main driver of this relationship. Additionally, while the Federal Reserve's actions may have some impact, real business cycle theorists place more emphasis on the role of technological changes and productivity shocks in driving economic fluctuations. Therefore, option B, which emphasizes the expansion of bank loans and the Federal Reserve's use of all available information to stabilize prices, is the most accurate choice.

According to Real Business Cycle Theorists,the Tendency of Money to Lead