The key ripple effect in real business cycle theory is the ________ decision and it depends on the ________.
A)when-to-invest; real interest rate
B)when-to-work; real interest rate
C)what-to-save; nominal interest rate
D)where-to-work; real wage rate
E)when-to-work; rigidity of the money wage rate

Question

Quizplus · Accepted Answer

In real business cycle theory, the key ripple effect is the "when-to-work" decision, which depends on the real interest rate. This theory emphasizes how changes in technology and productivity affect labor supply decisions through the real interest rate.

The Key Ripple Effect in Real Business Cycle Theory Is