Question

According to real business cycle theorists, ______________ consumption resulting from the major production innovations incentivizes businesses to borrow ______________ from banks, causing the money supply to ______________.

Answer 1

Answer:

increase in,  more,  increase

Explanation:

Real business cycle theory states that the $\text{macroeconomic fluctuations}$ in any economy can be explained by the technological shocks and the changes in the productivity. All these changes in the technological growth affects the decisions of the firms on investment as well as workers or the labor supply.

Edward C. Prescott and Finn E. Kydland first gave the concept of real business cycle theory.

In the theory of real business cycle, the increase in consumption results from the major $\text{production innovations incentivizes businesses}$ to borrow more from the banks, and it causes the supply of money to increase.