Final answer:
Most economists believe that cyclical changes in real output and employment levels are primarily caused by fluctuations in the business cycle, leading to cyclical unemployment. Wages may be 'sticky' due to various economic theories, and the Keynesian perspective emphasizes the role of aggregate demand in these fluctuations.
Step-by-step explanation:
Most economists attribute the cyclical changes in the levels of real output and employment to the business cycle. These fluctuations in economic activity result in cyclical unemployment, which rises and falls with the business cycle. Cyclical changes are often impacted by the overall demand for goods and services within an economy.
In a labor market with flexible wages, the theory is that wages would adjust to ensure that the quantity demanded of labor equates to the quantity supplied at the equilibrium wage. However, wages may not always be flexible due to factors such as implicit contracts, efficiency wage theory, adverse selection of wage cuts, the insider-outsider model, and relative wage coordination, which explains why wages can be 'sticky', especially when it comes to downward adjustments.
The Keynesian perspective further highlights that changes to aggregate demand are key causes of business cycle fluctuations. Keynesians believe that without active policy intervention, the economy may struggle to return to full employment during recessionary or inflationary periods.