Unexpected Shocks in the Economy Lead to Fluctuation

Business cycle theories and their improvements are very interesting topics till now (although it is twentieth century product) because every economy wants a stables growth path but there are some expected or unexpected shocks which leads to fluctuations, as a result whole economy fluctuates. We are unable to foresee such fluctuations, so economists try their best in studying related situations in their country and rest of the world. They can ´t afford applying a policy and its results. May be the process will be too costly or harmful to test. So they do all these things in paper works, they study the previous literatures, their own economical situation and try to build a good model. Which could be able to answer the required questions? In this Article Lucas tries to explore the same things. He just wants to tell us about the features of a good model. He used comparative study between and within different school of thoughts (Keynes, Neoclassical) and tries his level best to show us about a good technique and model. In the very first part he tells us about a model following that the advantages of a good model. He is of the view that a good model will be able to tell us more things in a technical way, verbal explanation is not enough. About talking a good model he says model should be simple† The models answers actual economies give to simple questions, the more we trust its answers to harder questions†, give better imitation† depend on the particular questions to which oneShow MoreRelatedNew Classical Macroeconomics Arose From The Monetarism And Rational Expectation School Essay922 Words   |  4 Pagesrecession and a series of macroeconomic issues. Keynesian economists believe that changes in the money supply will lead to changes in effective demand that will changes in the total economy. 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