The factor leading to business cycles in the real business cycle theory is changes in the growth rate of
A) labor supply.
B) the money wage rate.
C) productivity.
D) the quantity of money.

Question

Quizplus · Accepted Answer

Real business cycle theory states that changes in the growth rate of productivity lead to fluctuations in business cycles. This is because changes in productivity affect output, employment, and consumption, which ultimately impact business cycles. Changes in labor supply or the money wage rate may also have an impact, but they are considered to be secondary factors in real business cycle theory. The quantity of money is not considered to have a significant impact in this theory.

The Factor Leading to Business Cycles in the Real Business