According to the real business cycle theory, macroeconomies are always operating where aggregate supply equals aggregate demand. According to this theory, the business cycle is
A) nonetheless explained by shifts in aggregate demand.
B) caused by negative correlations between the interest rate and work effort.
C) caused by random shifts in the aggregate production function.
D) nonetheless explained by the severe inelasticity of aggregate supply.
E) almost completely explained by the near-perfect elasticity of both aggregate supply and aggregate demand.

Question

Quizplus · Accepted Answer

Real Business Cycle Theory attributes fluctuations in the business cycle to random shifts in the aggregate production function, often due to technological changes or external shocks, rather than to changes in aggregate demand.

According to the Real Business Cycle Theory, Macroeconomies Are Always