Abstract on Real Business Cycl

The author of “Real Business Cycles: A New Keynesian Perspective”, N. Gregory Mankiw, starts off by explaining that the main difference between the RBC and other schools of thought is what they believe creates fluctuations (recessions and booms) in the business cycles. The RBC explains these changes in the economy as responses to the availability of production technology. Mankiw discusses why he believes they have come to the wrong conclusion and further illustrates perceived weaknesses …

…supply shocks to the economy. Mankiw finishes by stating that, because of lack of evidence to support their ideas, he believes the real business cycle theory will eventually be considered an unreasonable explanation for business cycle fluctuations. Although it might provide the wrong answers, it has provoked further examination of certain aspects of the economy. This, in turn, will undoubtedly lead to progress in the area of understanding the ups and downs of the economy