The Real Business Cycle Theory Asserts That Even Slight Changes

question 10

Multiple Choice

The real business cycle theory asserts that even slight changes in wages may have a significant impact on output since

• A)labor supply is highly sensitive to temporary changes in wage rates
• B)even a small wage rate change will induce people to work harder if it is assumed to be permanent
• C)wages adjust only slowly, so even a small wage rate change will leave the labor market out of equilibrium for a long time
• D)smaller wage rate changes are harder to detect and therefore workers are more likely to make forecasting errors
• E)none of the above

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Definitions:

Diffusion

The movement of molecules or particles from an area of high concentration to an area of low concentration.

Shape of Organism

The form or structure of a living entity, influenced by genetic and environmental factors.

Size of Organism

Refers to the physical dimensions of an individual organism, which can vary widely across different species and within a species.

Environment

The surroundings or conditions in which a person, plant, or animal lives or operates, including natural, social, and cultural factors.