Real business cycle theory explains the business cycle as the result of
A) excess growth of the quantity of money.
B) unstable investment demand.
C) shocks to consumer spending habits.
D) fluctuations in productivity.

Question

Quizplus · Accepted Answer

Real business cycle theory attributes fluctuations in economic activity to changes in productivity rather than to monetary or demand-side factors. This perspective suggests that external shocks to technology or productivity can lead to expansions or contractions in the economy.

Real Business Cycle Theory Explains the Business Cycle as the Result