Problem
Read the following article: Plosser, Charles. 1989. "Understanding Real Business Cycles". Journal of Economic Perspectives 3(3): 51-78. Plosser is one of the pioneers of real business cycle theory. What you have done in the previous exercises is very similar to what Plosser does in his article. His economy is a little more realistic, and he gets his shocks from the real world, instead of having the computer draw random numbers, but the basic idea is the same. Describe the real business cycle research program in no more than two paragraphs. What question is the theory trying to answer? What is the approach to answering the question? What does Plosser's model imply for government policy? Specifically, can the government influence the economy, and is government intervention called for?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.