| Question | In recent years, a new theory of real business cycles (or RBCs) has been proposed (this approach is further analyzed in Chapter 31). RBC theory suggests that business fluctuations are caused by shocks to productivity, which then propagate through the economy. a. Show the RBC theory in the AS-AD framework. b. Discuss whether the RBC theory can explain the customary characteristics of business fluctuations described on pages 430-431 |
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| Subject | business economics |
