Comovement different sectors or industries within the

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Comovement: Different sectors or industries within the economy must experience must experience the effects of the cycle concurrently. Changes in labor supply or employment. RBC models were generally successful in accounting for persistence and comomovement but less successful in offering convincing explanations for fluctuations in employments In addition to attributing all business cycle phases to technological shocks, real business cycle theory considers business cycle fluctuations an efficient response to those exogenous changes or developments in the real economic environment. Therefore, business cycles are “real” according to RBC theory in that they do not represent the failure of markets to clear or show an equal supply to demand ratio, but instead, reflect the most efficient economic operation given the structure of that economy. As a result, RBC theory rejects Keynesian economics , or the view that in the short run economic output is primarily influenced by aggregate demand, and monetarism, the school of thought that emphasizes the role of government in controlling the amount of money in circulation. Despite their rejection of RBC theory, both of these schools of economic thought currently represent the foundation of mainstream macroeconomic policy. REFRENCES Real business cycle criticism Greg Mankiw and Larry Summers, 1986 Retrieved from

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