Question

According to the real business cycle models, A. the Federal Reserve can affect inflation and real GDP by using monetary policy to influence the money supply. B. inflation can change due to movements in the money​ supply, however, fluctuations in real GDP are mainly explained by changes in the level of technology.C. changes in the level of technology are the main causes of inflation and fluctuations in real GDP.D. wages and prices adjust quickly through rational expectations, so that monetary policy movements will create changes in the money supply which create fluctuations in real GDP.

Answer 1

Answer: The correct answer is "D. wages and prices adjust quickly through rational expectations, so that monetary policy movements will create changes in the money supply which create fluctuations in real GDP.".

Explanation: The economic cycle is a series of phases through which the economy passes and that happen in order until reaching the final phase in which the economic cycle begins again.

The main idea of these models is that economic cycles have a real origin and are the result of the optimal reaction of economic agents to this type of disturbance.

According to the real business cycle models wages and prices adjust quickly through rational expectations, so that monetary policy movements will create changes in the money supply which create fluctuations in real GDP.