Real business cycle theory emphasizes the effect of ________ on economic performance.

Question

Quizplus · Accepted Answer

Real business cycle theory posits that long-term economic growth is primarily driven by technological progress and productivity improvements, while short-term fluctuations in economic activity are primarily caused by aggregate supply shocks such as changes in productivity, natural disasters, or shifts in the availability of key resources like oil or labor. This view emphasizes the role of market forces and suggests that government intervention may actually impede the natural adjustment process of the economy. Therefore, the correct answer is C - aggregate supply shocks.

Real Business Cycle Theory Emphasizes the Effect of ________ on Economic