According to the real business cycle theory, during a recession the demand for labour ________ and the supply of labour ________.
A)increases; decreases
B)decreases; does not change
C)does not change; decreases
D)decreases; decreases
E)decreases; increases

Question

Quizplus · Accepted Answer

According to the real business cycle theory, during a recession, there is a decrease in demand for labour due to a fall in output and production. This leads to a decrease in the supply of labour as workers become unemployed or leave the labour force. Therefore, the correct choice is D: decreases; decreases.

According to the Real Business Cycle Theory, During a Recession