According to real business cycle theory, a. monetary factors affecting aggregate demand cause macroeconomic instability. b. when real wages fall during recessions, "real" unemployment rates rise. c. the net long-run costs of business fluctuations are severe. d. recessions result from declines in long-run aggregate supply, rather than decreases in aggregate demand.

Question

Business

Gabriel Bailey

27 May, 00:03

According to real business cycle theory, a. monetary factors affecting aggregate demand cause macroeconomic instability. b. when real wages fall during recessions, "real" unemployment rates rise. c. the net long-run costs of business fluctuations are severe. d. recessions result from declines in long-run aggregate supply, rather than decreases in aggregate demand.

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Answers (1)

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Rene Mcdowell · Answer 1

a. monetary factors affecting aggregate demand cause macroeconomic instability.

Explanation:

The real business cycle is a class of new macroeconomics principles in which the business cycle fluctuates to a large extend are accounted by the real shocks and are an efficient response to the exogenous variables like innovation in technology. An increase in the money supply will increase the aggregate demand creating an inflation.