In real business cycle models,a favorable supply shock
A)pushes the aggregate demand curve to the right.
B) causes real GDP to rise.
C) lowers the income of firms and individuals.
D) increases the price level.
E) pushes the aggregate supply curve to the left.

Question

Quizplus · Accepted Answer

In real business cycle models, a favorable supply shock is a positive external event that improves productivity, lowers production costs, or increases the availability of key resources. As a result, firms can produce more output for a given level of inputs, causing real GDP to rise.

In Real Business Cycle Models,a Favorable Supply Shock