Use aggregate supply and demand analysis to explain real business cycle theory.
What will be an ideal response?
Real business cycle theorists focus on real factors that affect aggregate supply rather than monetary or spending factors that affect aggregate demand. Significant changes in technology or resource prices will affect productivity and also the long-term growth of the economy.
If aggregate supply should increase due to an improvement in productivity, then real output will increase but the price level will remain the same. The reason the price level does not change is that aggregate demand will shift outward to accommodate the shift in aggregate supply. The reason that aggregate demand shifts is that there is an increase in the demand for money and it brings forth an increase in the supply of money.
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The table above gives Cathy's total utility from Mt. Dew. Cathy's marginal utility from additional Mt. Dews is
A) diminishing. B) increasing. C) constant. D) negative.
Which of the following is an example where price discrimination occurs?
a. quantity discounts b. Disney World c. theatres in New York City d. all of the above
Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500. Which of the following is true?
A. Marginal cost is increasing. B. Average variable cost is increasing. C. Average variable cost is decreasing. D. Cannot determine without more information.
The scientific method, on which economics rely, consists of several elements, including: (check all that apply)
a. observing real-world behavior and outcomes and formulating a law based on said observations b. continuing to test the hypothesis against facts. c. observing real-world behavior and outcomes and formulating a hypothesis based on said observations d. accepting, rejecting, and adjusting a hypothesis.