Real business cycles are cycles in ?
Correct answer: A. potential output
- A. potential output
- B. actual output
- C. real output
- D. international trade
Explanation
Real business cycle theory attributes fluctuations to real shocks that change productive capacity, so cycles are viewed as movements in potential output. This contrasts with demand-based theories that explain deviations of actual output from potential output.
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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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