4. Macroeconomic models a. Explain the key differences between the New Keynesian and Real Business Cycle models seen in the lectures. b. Figure 1 shows the response of the RBC model to a 1% productivity shock. Figure 2 shows the response of the NK model to the same shock. Explain (not describe) these responses and the reasons for any differences in the responses of the two models. 0.045 Figure 1: RBC model response to productivity 0 035 shock 0.03 0.035 0.02 0.015 TO'D 0.005 -capital stock this period () output ly) private consumption ( c) -hours worked ( -rental price of capital( r) -real wage (w) 0.025 Figure 2: NKM response to productivity shock 0015 0.01 0.005 D 6 11 16 21 26 31 01015 output ly private consumption ( c) hours worked it real wage (w] quarterly in flation minus target - quarterly nominal interestrate minus trend quarterly real interest rate minus trend