According to real business cycle theorists, the tendency of money to lead output may be due to
A)the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Bank of Canada's use of all available information in trying to stabilize the price
Level.
B)the Bank of Canada's use of all available information in trying to stabilize the price level and the Bank of Canada's use of all available information in trying to stabilize the level of
Economic activity.
C)the Bank of Canada's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in
Economic activity.
D)government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date.
E)the Bank of Canada's use of all available information in trying to stabilize business cycle fluctuations and the price level.

Question

Quizplus · Accepted Answer

Real business cycle theorists suggest that money tends to lead output because of anticipatory actions in the financial sector and proactive measures by central banks. Banks often expand loans in anticipation of future economic activity, and central banks, like the Bank of Canada, use available information to try to stabilize the price level, both of which can precede changes in real economic output.

According to Real Business Cycle Theorists, the Tendency of Money