Real business cycle theory would emphasize the ability of a beneficial supply shock to shift the __________ curve rightward and __________ Real GDP.

Question

Quizplus · Accepted Answer

Real business cycle theory focuses on the production side of the economy and emphasizes the importance of supply shocks in driving economic growth. A beneficial supply shock, such as a technological innovation or decrease in production costs, would cause the long-run aggregate supply (LRAS) curve to shift rightward, indicating an increase in the economy's potential output. As a result, real GDP would also increase. Therefore, the correct answer is D, LRAS; raise.

Real Business Cycle Theory Would Emphasize the Ability of a Beneficial