The Real Business Cycle Theory Asserts That Output Can Vary

Multiple Choice

The real business cycle theory asserts that output can vary significantly over a business cycle even if real wage rate changes are relatively small because

A) labor supply is very responsive to permanent wage rate changes
B) people are willing to substitute leisure intertemporarily
C) firms will adjust their output immediately by laying people off
D) even small changes add up after a while
E) workers spend their wage increases right away