Question

What are main policy implications of real business cycle

Answer 1

In an economic expansion, the real interest rate and the real wage do rise. An increase in the world price of oil does reduce product. A failure of real business cycle theory is the prediction that prices fall in a boom. In fact, prices rise.

Answer 2

Answer:

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Real business cycle models state that macroeconomic fluctuations in the economy can be largely explained by technological shocks and changes in productivity. These changes in technological growth affect the decisions of firms on investment and workers (labour supply).

Explanation:

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