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Real business cycle theory argues that money is very unimportant and that economic fluctuations are due...

Real business cycle theory argues that money is very unimportant and that economic fluctuations are due largely to changes in technology.Explain

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Real business-cycle theory is one in which business-cycle fluctuations to a large extent can be accounted for by real technological shocks. According to this theory, government should concentrate on long-run structural policy changes and not intervene through discretionary fiscal or monetary policy designed to actively smooth out economic short-term fluctuations. It shows that this theory does not believe money or money supply to have much of an impact in the economy .

Real business cycle theory rejects Keynesian economics and the effectiveness of monetary policy as promoted by monetarism and New Keynesian economics.

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