economies experience fluctuations in their ability to produce goods and services from inputs of capital and labor.These fluctuations may arise fron the weath environmental regulations.and oil prices,as well as technology itself.Critics of real business cycle theory ask,"What are the shocks?"It seems likely to them that technological progress occurs gradually.Also,these critics question whether recessions are really times of technical regress.The accumulation of technology may slow down.b ms unlikely that it goes into reverse iii.The neutrality of money.Reductions in money growth and inflation are usually associated with periods of high unemployment.Most observers interpret this as evidence that monetary policy has a strong influence on the real economy.Real business cycle theory focuses on nonmonetary(that is real"causes of business n money and output arises in in the money supply.no th reverse.Hence advocates of real business cycle theory argue that monetary policy does not affect real variables such as output and employment. iv.The flexibility of wages and prices.Most of microeconomic analysis assumes that prices adjust toequilibrate supply and demand Advocates of real business cvcle believe that macroecono omists should make the same assumption.They argu that the stickiness of wages and prices is not important for understanding economic fluctuations.Critics of real business cycle theory point out that many wages and prices are not flexible.They believe that this inflexibility explains both the existence of unemployment and the non-neutrality of money.economies experience fluctuations in their ability to produce goods and services from inputs of capital and labor.These fluctuations may arise from the weather, environmental regulations,and oil prices,as well as technology itself. Critics of real business cycle theory ask,“What are the shocks?”It seems likely to them that technological progress occurs gradually.Also,these critics question whether recessions are really times of technical regress.The accumulation of technology may slow down,but it seems unlikely that it goes into reverse. iii.The neutrality of money.Reductions in money growth and inflation are usually associated with periods of high unemployment.Most observers interpret this as evidence that monetary policy has a strong influence on the real economy.Real business cycle theory focuses on nonmonetary(that is,“real”)causes of business fluctuations,arguing that the close correlation between money and output arises because fluctuations in output cause fluctuations in the money supply,not the reverse.Hence,advocates of real business cycle theory argue that monetary policy does not affect real variables such as output and employment. iv.The flexibility of wages and prices.Most of microeconomic analysis assumes that prices adjust to equilibrate supply and demand.Advocates of real business cycle theory believe that macroeconomists should make the same assumption.They argue that the stickiness of wages and prices is not important for understanding economic fluctuations.Critics of real business cycle theory point out that many wages and prices are not flexible.They believe that this inflexibility explains both the existence of unemployment and the non-neutrality of money