According to the real business cycle RBC) theory, during a recession the demand for labor_________and the supply of labor _________.

Question

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According to RBC theory, during a recession, the demand for labor decreases due to the decrease in production and output. As a result, firms cut back on hiring, leading to a decrease in the supply of labor as workers become unemployed. Therefore, both the demand for and supply of labor decreases during a recession, which is best represented by choice B.

According to the Real Business Cycle RBC) Theory, During a Recession