According to the real business cycle (RBC) theory, recessions are the result of
A) a fall in the growth rate of productivity.
B) an increase in the growth rate of the quantity of money.
C) an increase in investment.
D) a decrease in the growth rate of the quantity of money.

Question

Quizplus · Accepted Answer

RBC theory posits that recessions are primarily caused by real (i.e., non-monetary) factors, such as changes in technology or productivity. A fall in the growth rate of productivity can lead to reduced economic output and employment, which are characteristic of recessions.

According to the Real Business Cycle (RBC) Theory, Recessions Are