·The labor market ·In RBC theory,. -shocks cause fluctuations in the intertemporal wage -workers respond by adjusting labor supply -this causes employment and output to fluctuate Critics argue that -labor supply is not very sensitive to the intertemporal real wage -high unemployment observed in recessions is mainly involuntary• The labor market • In RBC theory, – shocks cause fluctuations in the intertemporal wage – workers respond by adjusting labor supply – this causes employment and output to fluctuate • Critics argue that – labor supply is not very sensitive to the intertemporal real wage – high unemployment observed in recessions is mainly involuntary