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    The document discusses how technological progress can expand production frontiers by increasing the marginal product of both capital and labor. This allows for increased output without increasing the amount of money or human effort used. The document also mentions how nominal interest rates influence real interest rates and discusses using fiscal and monetary policy to counter economic cycles. However, it notes that countercyclical monetary policy may not be possible.

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    The document discusses how technological progress can expand production frontiers by increasing the marginal product of both capital and labor. This allows for increased output without increasing the amount of money or human effort used. The document also mentions how nominal interest rates influence real interest rates and discusses using fiscal and monetary policy to counter economic cycles. However, it notes that countercyclical monetary policy may not be possible.

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    8 views2 pages

    33

    Uploaded by

    sanjuladasan
    The document discusses how technological progress can expand production frontiers by increasing the marginal product of both capital and labor. This allows for increased output without increasing the amount of money or human effort used. The document also mentions how nominal interest rates influence real interest rates and discusses using fiscal and monetary policy to counter economic cycles. However, it notes that countercyclical monetary policy may not be possible.

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    of 2

    The production frontier is expanded as a result of rapid technological progress, allowing for increased

    output.

    As a result of the technical advancement, the marginal product of both

    money and human effort. When nominal interest rates increase, real interest rates follow suit. Earnings
    in reality

    enhances the available workforce and hence boosts employment.

    Real Business Cycle Theory in Macroeconomics

    Currencies and Costs

    Money has no intrinsic value or influence.

    When a business grows, the quantity of its output increases, necessitating a decrease in selling price.

    10

    Real Business Cycle Theory in Macroeconomics

    Monetary and Fiscal Policy to Counter the Cycle?

    This suggests that the government may employ fiscal and/or

    budgetary measures taken to forestall a decline in GDP.


    However, countercyclical monetary policy is impossible because

    In a nutshell, money doesn't care.

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