This theory views shocks to tastes (workers' willingness to work,for example)and technology (productivity)as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.
A)the natural rate hypothesis
B)hysteresis
C)real business cycle theory
D)the Phillips curve model

Question

Quizplus · Accepted Answer

This theory is known as the Real Business Cycle theory, which states that short-run fluctuations in the business cycle are mainly driven by shocks to tastes and technology, causing fluctuations in the natural rate of output. This theory suggests that changes in productivity and work preferences can lead to economic fluctuations, rather than changes in aggregate demand or monetary policy as suggested by other theories such as the Phillips Curve model or the Natural Rate Hypothesis.

This Theory Views Shocks to Tastes (Workers' Willingness to Work,for