Business cycle events that arise solely from aggregate demand shifts are emphasized by the Select one

a. Keynesian and real business cycle theories.

b. monetarist and real business cycle theories.

c. Keynesian and monetarist cycle theories

d. none of the major theories

Expert Solution

Answer :- Option 'c' is the correct Answer

Business cycle events that arise solely from aggregate demand shifts are emphasized by the Keynesian and monetarist cycle theories.

The factor leading to business cycles in the Keynesian model is changes in business confidence.

Keynes used the term "animal spirits" to represent fluctuations in business confidence.

Keynesian cycle theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations.

One model of the business cycle claims that volatile business confidence is the primary factor in starting a business cycle. This model is the Keynesian cycle theory.

According to the monetarist theory of the business cycle, a change in the growth rate of the quantity of money leads to changes in real GDP.

The new Keynesian cycle theory emphasizes that, because of long-term wage agreements, both expected and unexpected fluctuations in aggregate demand can change real GDP.

Rahul Sunny answered 2 years ago

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