According to real business cycle theory, the primary causes of business cycles are
A) shocks to aggregate demand.
B) monetary factors.
C) waves of self-fulfilling optimism and pessimism.
D) fiscal shocks.
E) technology shocks.

Question

Quizplus · Accepted Answer

Real business cycle theory posits that business cycles are primarily caused by fluctuations in technology shocks, such as changes in productivity or changes in the availability of natural resources. This theory emphasizes the role of productivity and efficiency in economic growth and suggests that fluctuations in output and employment are the result of changes in real economic factors rather than changes in monetary or fiscal policy.

According to Real Business Cycle Theory, the Primary Causes of Business