Characteristics of real business cycle models

Reference no: EM133253791

Assignment:

Consider the main characteristics and implications of Real Business Cycle models (RBC) discussed in class.

a) In no more than 4 sentences, explain why these models do a good job explaining the observed pro-cyclicality of employment and labor productivity simultaneously

b) Assume that due to political reasons the government suddenly and significantly increases the salaries of all its workers. Explain how that could end up hurting all other workers in the private sector.

Reference no: EM133253791

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