The factor that leads to business cycle events within real business cycle theory is
A) adverse shocks to international trade.
B) changes in growth rate in productivity.
C) changes in the growth rate in the quantity of money.
D) changes in expected future sales and profits of firms.

Question

Quizplus · Accepted Answer

Real business cycle theory attributes business cycle events to changes in the growth rate of productivity. Adverse shocks to international trade or changes in growth rate of the quantity of money may affect the economy, but they are not the primary factor leading to business cycle events in this theory. Similarly, changes in expected future sales and profits of firms may result from the business cycle, but they are not the root cause.

The Factor That Leads to Business Cycle Events Within Real