In the real business cycle theory,business cycle contractions begin as a result of changes in

Question

Quizplus · Accepted Answer

The real business cycle theory proposes that business cycle contractions arise from a negative supply shock that reduces long-run aggregate supply. This shock reduces the productive capacity of the economy, leading to a decrease in output and employment levels. Therefore, the correct answer is E, as changes in long-run aggregate supply lead to business cycle contractions in this theory.

In the Real Business Cycle Theory,business Cycle Contractions Begin as a Result