According to the real business cycle theory, technological advances
A) increase the marginal product of labor, which causes real wages and output to decline.
B) decrease the marginal product of labor, which causes real wages and output to increase.
C) increase the marginal product of labor, which causes real wages to increase and output to decline.
D) increase the marginal product of labor, which causes real wages and output to increase.

Question

Quizplus · Accepted Answer

According to the real business cycle theory, technological advances increase the marginal product of labor, which causes real wages and output to increase. This is because technological advances lead to increased efficiency and productivity, allowing workers to produce more output per unit of labor input. This leads to an increase in real wages as firms compete to attract workers, and an increase in output as firms can produce more with the same amount of inputs.

According to the Real Business Cycle Theory, Technological Advances