It is conceivable to implement a fiscal strategy that counters economic downturns.

During times of
declining productivity, the government could prioritise roadway construction.

There is no purpose in pursuing this course of action because the market equilibrium

This is a Pareto-efficient allocation of resources. As a defence mechanism against the

reduction in output is an ineffective indicator of problems.

12

Real Business Cycle Theory in Macroeconomics

Success

Real interest rates and inflation are more stable during economic growth.

salaries go up.

13

Real Business Cycle Theory in Macroeconomics

In general, rising oil prices have a negative impact on output.