Question

This theory views shocks to tastes (workers' willingness to work, for example) and technology (productivity) as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output. Question 42 options: A) the natural rate hypothesis B) hysteresis C) real business cycle theory D) the Phillips curve model

Answer 1

Answer:

The answer to this question is option C  Real Business Cycle theory

Explanation:

The Real business cycle theory is the theory that views hocks to tastes (workers' willingness to work, for example) and technology (productivity) as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.  

Real business cycle models state that macroeconomic fluctuations in the economy can be largely explained by technological shocks and changes in productivity. These changes in technological growth affect the decisions of firms on investment and workers (labour supply)

Hence the answer is option C  Real Business Cycle theory