Real business cycle analysis differs from both the new classical and the new Keynesian analyses in holding that
A)the aggregate supply curve is vertical even in the short run.
B)changes in aggregate demand can affect output in the long run.
C)money is neutral in the long run, but not in the short run.
D)prices are sticky in the short run.

Question

Quizplus · Accepted Answer

Real business cycle analysis holds that the aggregate supply curve is vertical even in the short run, meaning that changes in aggregate demand can only affect prices, not output. This differs from new classical and new Keynesian analyses, which both hold that changes in aggregate demand can affect output in the short run. Real business cycle analysis also holds that money is neutral in the long run, but not in the short run, and that prices are flexible and respond quickly to changes in supply and demand.

Real Business Cycle Analysis Differs from Both the New Classical