The real business cycle theory is based on all of the assumptions below EXCEPT
A) the absence of rationality among people.
B) flexible wages.
C) pure competition.
D) flexible prices.

Question

Quizplus · Accepted Answer

The real business cycle theory assumes that individuals and firms are rational in their decision-making, and therefore do not make decisions that leave them worse off. Flexible wages, pure competition, and flexible prices are all assumptions of the real business cycle theory.

The Real Business Cycle Theory Is Based on All of the Assumptions