According to the real business cycle theory, a technology shock that decreases the demand for loanable funds will ________ employment and will ________ real GDP.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

A technology shock that decreases the demand for loanable funds typically leads to lower investment, which can reduce productivity and economic output. Consequently, this can lead to lower employment and a decrease in real GDP, aligning with option D.

According to the Real Business Cycle Theory, a Technology Shock