what are the main proportion of the real business cycle model
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Real business-cycle theory (RBC theory) is a class of new classical macroeconomics models in which business-cycle fluctuations to a large extent can be accounted for by real (in contrast to nominal) shocks.
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The Chicago school of economics is a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago, some of whom have constructed and popularized its principles.
In the context of macroeconomics, it is connected to the freshwater school of macroeconomics, in contrast to the saltwater school based in coastal universities (notably Harvard University, Columbia University, Massachusetts Institute of Technology, and University of California, Berkeley). Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations. The freshwater-saltwater distinction is largely antiquated today, as the two traditions have heavily incorporated ideas from each other. Specifically, new Keynesian economics was developed as a response to new classical economics, electing to incorporate the insight of rational expectations without giving up the traditional Keynesian focus on imperfect competition and sticky wages.
Chicago economists have also left their intellectual influence in other fields, notably in pioneering public choice theory and law and economics, which have led to revolutionary changes in the study of political science and law. Other economists affiliated with Chicago have made their impact in fields as diverse as social economics and economic history. Thus, there is not a clear delineation of the Chicago school of economics, a term that is more commonly used in the popular media than in academic circles.[citation needed] Nonetheless, Kaufman (2010) says that the Chicago school can be generally characterized by the following:[1]
In the context of macroeconomics, it is connected to the freshwater school of macroeconomics, in contrast to the saltwater school based in coastal universities (notably Harvard University, Columbia University, Massachusetts Institute of Technology, and University of California, Berkeley). Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations. The freshwater-saltwater distinction is largely antiquated today, as the two traditions have heavily incorporated ideas from each other. Specifically, new Keynesian economics was developed as a response to new classical economics, electing to incorporate the insight of rational expectations without giving up the traditional Keynesian focus on imperfect competition and sticky wages.
Chicago economists have also left their intellectual influence in other fields, notably in pioneering public choice theory and law and economics, which have led to revolutionary changes in the study of political science and law. Other economists affiliated with Chicago have made their impact in fields as diverse as social economics and economic history. Thus, there is not a clear delineation of the Chicago school of economics, a term that is more commonly used in the popular media than in academic circles.[citation needed] Nonetheless, Kaufman (2010) says that the Chicago school can be generally characterized by the following:[1]
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