Key Ideas

1. Lucas models of business cycles are based on the rational expectations theory which assumes that individuals make decisions based on all available information.

2. The models emphasize the role of technology shocks in driving business cycles.

3. Lucas argues that monetary policy is not an effective tool for stabilizing the economy.

4. The models incorporate real business cycles, which are driven by changes in productivity.

5. Lucas highlights the importance of understanding expectations and how they influence economic behavior.

6. The models suggest that government interventions, such a....
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Quiz