In real-business-cycle theory, real output can change without a change in the price level.

Question

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Real-business-cycle theory focuses on technology shocks and other supply-side factors that can impact real output without necessarily affecting the price level. This stands in contrast to traditional Keynesian theory, which emphasizes the role of demand-side factors, such as changes in government spending or monetary policy, that can affect both real output and the price level.

In Real-Business-Cycle Theory, Real Output Can Change Without a Change