If real business cycle theory uses an upward-sloping aggregate _____ curve, aggregate _____ is _____.
A) demand; supply; relevant
B) demand; supply; irrelevant
C) supply; demand; irrelevant
D) supply; demand; relevant

Question

Quizplus · Accepted Answer

Real business cycle theory is based on the assumption that fluctuations in output and employment are caused by real shocks to the economy, such as changes in technology or the availability of resources. It uses an upward-sloping aggregate supply curve, indicating that changes in aggregate demand will result in changes in the price level rather than output. Therefore, aggregate demand is deemed irrelevant, while aggregate supply is relevant to the theory.

If Real Business Cycle Theory Uses an Upward-Sloping Aggregate _____