According to the real business cycle theory, an increase in energy prices will

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According to the real business cycle theory, an increase in energy prices will lead to higher production costs for firms, causing a decrease in real GDP due to decreased production and supply. At the same time, higher input costs will cause prices to rise, resulting in an increase in the price level. Therefore, choice C - "decrease real Gross Domestic Product (GDP) but increase the price level" is the best answer.

According to the Real Business Cycle Theory, an Increase in Energy