Which of the following is the factor that creates business cycles in the real business cycle theory?
A) an unexpected change in aggregate demand
B) a change by the Fed in the growth rate of the quantity of money
C) a change in expectations about future sales and profits
D) a change in the growth rate of productivity

Question

Quizplus · Accepted Answer

Real Business Cycle Theory attributes business cycles to real (in contrast to nominal or purely monetary) shocks, such as changes in technology or productivity, rather than to monetary or demand-side factors. Changes in the growth rate of productivity can lead to expansions or contractions in the economy, thus creating business cycles according to this theory.

Which of the Following Is the Factor That Creates Business