Why Aggregate supply plays a crucial role in the Real business cycle theory?
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Neo classicial and real business cycle focus on aggregate supply curve . The neo classical say that market will reach equilibrium because of free hand or free market and there is no requirement of government intervention.
AS curve shift to left because input price which cause AD curve to shift left or vice-versa. In both case the economy will be back to the equilibrium
It say that government intervention will amplify the fluctuations and delay the convergence to the equilibrium
Neoclassical and real business cycle say that polices should not prevent creative destruction means there should be no hurdle to new innovation. It also say that company who use new technology will survive and those who did not adopt will out