In real business cycle theory, the factor leading to a business cycle is
A) unexpected changes in aggregate demand.
B) changes in investment.
C) changes in the quantity of money.
D) fluctuations in the pace of technological change.

Question

Quizplus · Accepted Answer

Real business cycle theory posits that fluctuations in the pace of technological change are the primary cause of business cycles. This theory suggests that shocks to technology lead to changes in productivity, employment, and output, which in turn cause the ups and downs of the economic cycle. Unlike Keynesian theory, real business cycle theory emphasizes the role of supply-side factors in economic fluctuations, rather than focusing on changes in aggregate demand or monetary policy.

In Real Business Cycle Theory, the Factor Leading to a Business