According to the real business cycle theory, the immediate effects from a change in productivity include which of the following?
I. Investment demand changes.
II. Demand for labor changes.
III. Government expenditures change.
A) I
B) I and II
C) I and III
D) II and III

Question

Quizplus · Accepted Answer

Real business cycle theory suggests that changes in productivity directly affect investment demand and the demand for labor. Higher productivity can lead to increased investment as businesses seek to capitalize on more efficient production processes. Similarly, changes in productivity can affect the demand for labor, as more productive firms may need more or fewer workers depending on the nature of the productivity change. Government expenditures are not directly affected by changes in productivity according to this theory, as they are more influenced by fiscal policy decisions.

According to the Real Business Cycle Theory, the Immediate Effects