In real business cycle theory, a decrease in productivity leads to all of the following events EXCEPT
)

Question

Quizplus · Accepted Answer

According to real business cycle theory, a decrease in productivity results in a decrease in output, leading to a decrease in the demand for labor and loanable funds. As a result of the decrease in the demand for labor, the real wage rate would fall rather than rise. Therefore, the correct answer is D as it is the option that is not consistent with the theory.

In Real Business Cycle Theory, a Decrease in Productivity Leads