Real Business Cycle Theory (RBCT) is an economic theory that explains fluctuations in economic activity, such as recessions and expansions, as a result of real (non-monetary) shocks to the economy. These shocks can include changes in technology, resource availability, or productivity, which affect the supply side of the economy. According to RBCT, these real factors lead to variations in output and employment, rather than changes in demand or monetary policy. The theory suggests that individuals and firms respond rationally to these shocks, adjusting their labor and capital usage accordingly. Robert Lucas, a key figure in the development of RBCT, emphasized that these cycles are a natural part of economic growth and should be understood through the lens of real factors rather than purely monetary influences.