According to real business cycle models

Question

Quizplus · Accepted Answer

Real business cycle models posit that the economy is normally operating at potential GDP, which means that the economy is producing its maximum level of output given its resources and technology. Therefore, choice D is the correct answer. Choices A, B, and C are incorrect because real business cycle models do not typically support them. For example, real business cycle models do not typically focus on the Phillips curve, as it is more commonly associated with traditional Keynesian economics. Additionally, real business cycle models often emphasize the importance of productivity shocks and other real factors, rather than monetary policy, as the primary drivers of fluctuations in real GDP.

According to Real Business Cycle Models