According to the real business cycle theory, ________ decrease the marginal product of labor, which causes real wages and output to decrease.
A) negative technology shocks
B) positive technology shocks
C) increases in the money supply
D) decreases in the money supply

Question

Quizplus · Accepted Answer

According to the real business cycle theory, negative technology shocks, such as a decrease in productivity or innovation, reduce the marginal product of labor. This decrease in productivity leads to a decrease in real wages and output. Positive technology shocks can increase the marginal product of labor and lead to an increase in real wages and output. Changes in the money supply are not related to the real business cycle theory.

According to the Real Business Cycle Theory, ________ Decrease the Marginal