Real business cycle theorists argue that _________ can explain short- and long-term fluctuation in output?
Correct answer: C. intertertemporal decisions of households, firms and government
- A. imperfect labor markets
- B. rational expectations
- C. intertertemporal decisions of households, firms and government
- D. sun spot cycles
Explanation
Real business cycle theory links output fluctuations to real factors and the intertemporal decisions of households, firms, and governments. It generally treats markets as adjusting through rational choices rather than focusing on persistent market imperfections.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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