The Idea That Business Fluctuations Are Primarily Caused by Factors

question 17

Multiple Choice

The idea that business fluctuations are primarily caused by factors affecting aggregate supply rather than aggregate demand is a central tenet of

• A)efficiency wage theory.
• B)real-business-cycle theory.
• C)mainstream economics.
• D)monetarism.

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Definitions:

Speculative Motive

The intent to hold cash or other assets for the purpose of benefiting from future market movements.

Precautionary Motive

The desire to hold cash or liquid assets to guard against unforeseen future needs and emergencies.

Transaction Motive

The need for cash to meet immediate and anticipated demands for payment, a key reason for holding cash in business.

Speculative Motive

The intention to hold cash or other assets in anticipation of future market fluctuations to gain financial advantages.