When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of business cycle fluctuations?
A) real business cycle theory
B) Keynesian cycle theory
C) monetarist cycle theory
D) new classical cycle theory

Question

Quizplus · Accepted Answer

Real Business Cycle Theory attributes fluctuations in the economy to real factors like changes in technology or productivity, rather than monetary or fiscal policies. A negative labor productivity rate, as seen in 2008, aligns with this theory, suggesting that real changes in the economy's productive capacity can lead to economic downturns.

When the Recession Started in 2008, the Government Estimated That