Real Business Cycle Flashcards
1
Q
Who championed Real Business Cycle?
A
Charles Plosser
2
Q
What are the two core ideas of RBC?
A
- Changes in productivity and feedback cycles create business cycles (every 7 years or so)
- Counter-cyclical monetary or fiscal policy doesn’t work.
3
Q
What is the feedback cycle?
A
People buy into a sector, and then realize that it is not so good.
4
Q
What is Total Factor Productivity?
A
Total measure of the productivity of inputs in the aggregate.
5
Q
What did RBC say about unemployment?
A
It doesn’t exist, same reasons as New Classicalism.
6
Q
What did RBC say about AD?
A
Changes in aggregate demand take years and are permanent, driven by demographics.
7
Q
What is TFP affected by?
A
- Technology, Education, Skills
- Input costs, Energy prices
- War
- Climate
- Regulation
8
Q
What of RBC has been kept?
A
TFP and the idea that business cycles exist.
