Which theory assumes that business cycles occur because of changes in business confidence?
A) monetarist cycle theory
B) real business cycle theory
C) new classical cycle theory
D) Keynesian cycle theory

Question

Quizplus · Accepted Answer

Keynesian cycle theory posits that fluctuations in business confidence can lead to changes in aggregate demand, which in turn causes business cycles. This theory emphasizes the role of psychological factors and uncertainty in economic decision-making.

Which Theory Assumes That Business Cycles Occur Because of Changes