Real business cycle and new Keynesian models disagree upon

Question

Quizplus · Accepted Answer

Real business cycle and new Keynesian models primarily differ in their views on unemployment. Real business cycle theory suggests that changes in unemployment are largely voluntary, as they result from individuals' choices in response to changes in the economic environment. In contrast, new Keynesian models argue that changes in unemployment can be involuntary, stemming from factors like price and wage stickiness that prevent the labor market from clearing.

Real Business Cycle and New Keynesian Models Disagree Upon