According to real business cycle theory,supply shocks cause
A) changes in both the volume of transactions and the demand for money.
B) changes in the price level but no changes in the unemployment rate.
C) no real changes in the economy, only changes in money, wages, and prices.
D) a shift in the aggregate demand curve but no change in the price level.
E) labor surpluses as firms attempt to increase output, holding wages constant.

Question

Quizplus · Accepted Answer

Real business cycle theory posits that supply shocks can lead to changes in the volume of transactions and the demand for money, as they affect the real output and productivity of the economy, influencing both the supply side and the demand for money for transactions.

According to Real Business Cycle Theory,supply Shocks Cause