Question

The real-business-cycle approach attributes even short-run increases in real GDP largely to aggregate supply shocks. Rightward shifts in aggregate supply tend to push down the equilibrium price level. How could the real-business-cycle perspective explain the low but persistent inflation that the United States experienced until 2007?

Short answer

The reason would be that aggregate demand increases at a faster pace than the rise in aggregate supply. it's caused by process.

Step-by-step solution

Introduction

Short-run increases in real GDP largely to aggregate supply shocks, Rightward shifts in aggregate supply tend to knock down the equilibrium indicator. The rationale would be that aggregate demand increases at a faster pace than the increase in aggregate supply. it's caused byprocess.

Explanation

It is providing the important business cycles approach attributes even short run increases in real GDP largely to aggregate supply shocks. The rightward shift in aggregate supply tends to cut down the equilibrium index. So, the rationale would be that aggregate demand increases at a faster pace than the rise in aggregate supply. it's caused by process. Therefore, the worth level rose during in those years.