Problem
1. What do you understand by the term 'real business cycle theory'? How does it contrast with demand-induced theories of the business cycle?
2. A recession is blamed on a fall in aggregate demand. Set out the appropriate policy response by government if (a) the monetarist theory of the business cycle is correct, or (b) the traditional Keynesian view of the business cycle is correct. Use appropriate diagrams to illustrate you responses.
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.