In real-business-cycle theory, changes in the:
A) Demand for money respond to changes in the supply of money
B) Supply of money respond to changes in the demand for money
C) Demand for money respond to changes in efficiency wages
D) Supply of money respond to changes in coordination failures

Question

Quizplus · Accepted Answer

Real-business-cycle theory suggests that changes in the supply of money have a direct impact on real economic variables, such as output and employment, rather than just on nominal variables like prices. Therefore, in this theory, the supply of money responds to changes in the demand for money, as the demand for money is seen as reflective of the overall level of economic activity in the economy.

In Real-Business-Cycle Theory, Changes in The