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Question from Past Macroeconomics Qualifying Exam (Spring, 2005 - Question Five) at George Mason UniversityEdit

Adopt one of two positions and argue in its favor, negating what you perceive to be the primary objections to your position in the process:

AnswerEdit

  • Position # 1: It is antagonist because they focus on different factors that are causing cyles. The Austrians focus on nominal monetary shocks. This would be a false welfare reducing boom (people get misdirected). In contrast the Real business cycle is a result of technology (or productivity) shocks, AKA not nominal, but real changes in the economy. This can represent a point where the pareto position is acheived (think clearing the desk after a day at work).
  • Objection: RBC can be influenced by government moves (they at least aknowledge fiscal policy can be effective in a short-run).
  • Position # 2: The view that the economy is subject to changes in interest, productivity, and other conditions overtime, without being a diequilibirum analysis.
  • Objection: see position # 1

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