According to the real business cycle (RBC) theory, during a recession the demand for labor ________ and the supply of labor ________.
A) increases; decreases
B) decreases; does not change
C) does not change; decreases
D) decreases; decreases

Question

Quizplus · Accepted Answer

During a recession, the demand for labor decreases due to lower production and economic activity. As a result, the supply of labor also decreases as workers become unemployed or underemployed.

According to the Real Business Cycle (RBC) Theory, During a Recession