The real-business-cycle theory
A) is a monetarist view of the business cycle.
B) is the mainstream view of the business cycle.
C) assumes that the supply of money is constant.
D) says that macro instability results from shifts in the long-run aggregate supply curve.

Question

Quizplus · Accepted Answer

The real-business-cycle theory is a macroeconomic theory that explains business cycles in terms of shifts in the long-run aggregate supply curve. It assumes that changes in productivity, population growth, and technological advancements cause fluctuations in output and employment in the short run. This approach is different from other theories that attribute macroeconomic instability to changes in demand or the supply of money. Therefore, option D is the correct answer.

The Real-Business-Cycle Theory