In the real business cycle theory, a decrease in productivity leads to all of the following events EXCEPT
A)a fall in the real interest rate.
B)a rise in the real wage rate.
C)a decrease in the demand for labour.
D)a decrease in investment demand.

Question

Quizplus · Accepted Answer

In real business cycle theory, a decrease in productivity typically leads to a fall in the real wage rate, not a rise, as firms demand less labor due to lower productivity.

In the Real Business Cycle Theory, a Decrease in Productivity