Question

1. In a real business cycle, analyze the effect of a negative shock to technology (a negative shock to z) that lasts for one period. What is the effect when the shock persists for more than one period?

2. If there was a change in preferences in real business cycle, such as the representative agent valued leisure more and less for consumption goods. How would output and emploment be affected by this change?

Thank you!

Answer 1

1. Negative shock affect negatively the growth of technologies, when supply gets limited , price get increases according to the demand, this lead shortening the technology market. When shock lasts more than a period then companies will face worst economic crisis. By the business cycle the real fluctuations of economic changes can formulated. 2.Buisness will more sharp when marketing done in a wise manner. Marketing of product or the product introduction to customeres handled by representative agents of particular company. When incentives and target implemented they work greater in market, this helps the growth in buisness. Better salary makes better work and this better work helps better growth.