Real business cycle theory argues that the primary cause of business cycles is fluctuations in

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Real business cycle theory argues that the primary cause of business cycles is fluctuations in total factor productivity, which refers to changes in the efficiency with which the economy converts inputs into outputs. These productivity changes can be driven by technological advancements, changes in the availability of natural resources or labor, or shifts in the organization of production.

Real Business Cycle Theory Argues That the Primary Cause of Business