The key part of the real business cycle theory model is:
A) the importance of monetary policy.
B) the short-run aggregate supply curve.
C) changes in aggregate demand.
D) changes in potential output.

Question

Quizplus · Accepted Answer

The key part of the real business cycle theory model is changes in potential output, which are driven by technological improvements, changes in productivity, and other exogenous factors. The theory places a heavy emphasis on long-term economic growth and the supply side of the economy, rather than short-term fluctuations in aggregate demand or monetary policy.

The Key Part of the Real Business Cycle Theory Model