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Using the real business cycle model

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Using the real business cycle model, show that a recession could arise either through an aggregate supply shock or through an aggregate demand shock. What happens to inflation in each case? Explain why there is a difference between the long-run and the short-run in case of an aggregate demand shock.

In August 2017, the unemployment rate in Italy decrease, while the employment rate increased. Several commentators where puzzled by this figures, but as you are taking my course, you shouldn't be. Explain how this could occur.

Explain one of the costs of inflation.

Reference no: EM131739044

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