Suppose that an economist finds that in most recessions,which are times when employment is low,that real interest rates are extremely high.This finding would pose the biggest problem for the

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Real business cycle theory posits that fluctuations in employment and output are due to changes in technology or other real factors, rather than changes in the money supply or government policy. Therefore, high real interest rates during recessions would not fit with this theory, as it would imply a monetary explanation for the business cycle. New classical and new Keynesian theories emphasize the role of expectations and price adjustments, while Keynesian theory focuses on the role of government spending and fiscal policy.

Suppose That an Economist Finds That in Most Recessions,which Are