According to the real business cycle theory, the primary source of fluctuations in real output is changes in the:
A) level of investment spending by manufacturing firms.
B) rate of growth of total factor productivity.
C) rate of growth of the aggregate price level.
D) level of spending on durable goods by households.

Question

Quizplus · Accepted Answer

According to the real business cycle theory, fluctuations in real output are primarily caused by changes in the rate of growth of total factor productivity, which includes improvements in technology, better production processes, and more skilled labor. Changes in investment spending, durable goods spending, or the aggregate price level may have an impact on the economy, but they are not the primary source of fluctuations in real output.

According to the Real Business Cycle Theory, the Primary Source