According to real-business-cycle theory, recessions are caused by
A) deviations of aggregate supply from long-term growth trends.
B) monetary factors affecting aggregate demand.
C) people choosing leisure rather than work.
D) a decline in the supply of money.

Question

Quizplus · Accepted Answer

Real-business-cycle theory suggests that fluctuations in economic activity, including recessions, are caused by shocks to the economy's productive capacity. These shocks may include changes in technology, natural disasters, or government policies that affect the long-term growth trend of output. Therefore, deviations in aggregate supply from long-term growth trends are considered the primary cause of recessions in this theory.

According to Real-Business-Cycle Theory, Recessions Are Caused by