According to the real business cycle theory, which of the following is a true statement about the effects of an oil shock in the 1970s?
A) The shock affected real variables only and did not affect nominal variables.
B) The shock shifted the short-run aggregate supply curve but not the long-run aggregate supply curve.
C) The natural rate of unemployment remained unchanged, but employment levels did decline.
D) Relative prices changed but there was no impact on the price level in general.

Question

Quizplus · Accepted Answer

Real business cycle theory suggests that real shocks, like an oil shock, can affect employment levels without changing the natural rate of unemployment.

According to the Real Business Cycle Theory, Which of the Following