The idea that business fluctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of:
A) Efficiency wage theory
B) Real-business-cycle theory
C) Mainstream economics
D) Monetarism

Question

Quizplus · Accepted Answer

Real-business-cycle theory emphasizes that business fluctuations are mainly caused by factors affecting aggregate supply, such as technological advancements, changes in labor force, and natural disasters. This theory is in contrast to the idea that fluctuations are primarily a result of changes in aggregate demand, which is the focus of mainstream economics and monetarism. Efficiency wage theory, on the other hand, is a labor market theory that argues that paying higher wages to workers can improve productivity and reduce turnover. Therefore, the best choice is B.

The Idea That Business Fluctuations Are Primarily Caused by Factors