The "real business cycle" (RBC)model adapts the Lucas model by replacing its assumption of
A)demand shocks as primary generators of cycles.
B)adaptive expectations.
C)continuous market-clearing.
D)slow wage and price adjustment.

Question

Quizplus · Accepted Answer

The RBC model assumes that cycles are primarily generated by supply shocks, rather than demand shocks. This is a key difference from the Lucas model, which assumes demand shocks as the primary generator of business cycles.

The "Real Business Cycle" (RBC)model Adapts the Lucas Model by Replacing