Real business cycle theory, Microeconomics

REAL BUSINESS CYCLE THEORY:

The parable that motivates this discussion originated with Edmund Phelps and invites you to think that all men (and women) are islands. They have perfect information about the prices of goods and services on their islands but cannot sample the prices on other islands except by rowing there, a costly activity. Consequently, they can only form estimates of the general price level, the average of all prices. Thus, an increase in the general price level will be misperceived as an increase in the price of goods on the island, a (small) subset and, therefore, sub optimal decisions about consumption, production, and investment will be taken. In the spirit of the earlier section, the following account in the next is drawn from the book: 

Barro, Robert, Macroeconomics, New York: John Wiley & Sons, Inc. 

Posted Date: 11/10/2012 6:53:14 AM | Location : United States







Related Discussions:- Real business cycle theory, Assignment Help, Ask Question on Real business cycle theory, Get Answer, Expert's Help, Real business cycle theory Discussions

Write discussion on Real business cycle theory
Your posts are moderated
Related Questions
could a nations production possibilities curve ever shift inward


identify which curve (demand or supply) will be affected?

Using commodities as an example, explain the factors influencing the PES for such goods. The basic determinants of PES are time span included and the availability of producer s



Member's Quota in IMF  Quota represents the subscription by a member country to the capital fund of the IMF. Quotas are fixed for each country, taking into account such factor

In equilibrium, what are the letters and the total dollar amounts that correspond to the area for the... i. Original Consumer Surplus?  ii. Original Producer Surplus? iii.

give a detailed discussion on the term economics of scale as applied to economics, highting examples,limitation,and original of economics of scale.

What are the economic implications of income inequality? How can economic theory be helpful to analyze the causes and impact of income inequality? What are the concerns and how can