1 RBC Model

\[ \sigma(\hat{y})\] Y: standard Deviation- output volatility \[\rho(\hat{y}) \] Y: first order Auto-correlation- persistence of bussiness cycle \[ \frac{\sigma(\hat{I})}{\sigma(\hat{y})}\] I/Y:Relative standard deviation- Large variability of investment compared to output variability \[ \frac{\sigma(\hat{c})}{\sigma(\hat{y})}\] C/Y:relative standard deviation- variability of consumption compared to output variability
relative volatility of consumption

2 A Classical Monerary MOdel

HH budget constraints \[P_tC_t+Q_tB_t \]