Question

10.15 What is the most important/critical/defining assumption made by the real business cycle wing of classical theory that clearly distinguishes the theory AND, in turn, justifies their laissez-faire policy recommendations?

Answer 1

10.15. The most important and critical assumptions made by the real business cycle wing of classical theory is - for every decision to be taken, individual and organization always respond optimally that implies always respond with best outcome. There are people, that are in poor condition and lives in recession but it does not implies that they want to live in recession rather that situation is best as per the economic condition for them. This implies that laissez-faire, is the optimal policy being chosen by government for the economy.