ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Keynesian theory.
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monetarist theory.
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the classical model.
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all of the above
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Detailed explanation-1: -Real business cycle theory is the latest incarnation of the classical view of economic fluctuations. It assumes that there are large random fluctuations in the rate of technological change. In response to these fluctuations, individuals rationally alter their levels of labor supply and consumption.
Detailed explanation-2: -Real business-cycle theory This theory is most associated with Finn E. Kydland and Edward C. Prescott, and more generally the Chicago school of economics (freshwater economics). They consider that economic crisis and fluctuations cannot stem from a monetary shock, only from an external shock, such as an innovation.
Detailed explanation-3: -A business cycle involves periods of economic expansion, recession, trough and recovery. The duration of such stages may vary from case to case. The real business cycle theory makes the fundamental assumption that an economy witnesses all these phases of business cycle due to technology shocks.
Detailed explanation-4: -Business cycles as we know them today were first identified and analyzed by Arthur Burns and Wesley Mitchell in their 1946 book, Measuring Business Cycles. One of their key insights was that many economic indicators move together.