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Homework answers / question archive / According to the real business cycle model, a
According to the real business cycle model,
a. increases in aggregate demand do not affect GDP.
b. increases in aggregate demand lower GDP.
c. increases in aggregate demand lower the price level.
d. increases in aggregate demand raise GDP.
This is a correct option because according to real business cycle model, any investment done in capital and output produced always converge to steady-state. This implies, an increase in aggregate demand will not affect the GDP of the country.
