Use aggregate supply and demand analysis to explain real business cycle theory.

What will be an ideal response?

Real business cycle theorists focus on real factors that affect aggregate supply rather than monetary or spending factors that affect aggregate demand. Significant changes in technology or resource prices will affect productivity and also the long-term growth of the economy.
If aggregate supply should increase due to an improvement in productivity, then real output will increase but the price level will remain the same. The reason the price level does not change is that aggregate demand will shift outward to accommodate the shift in aggregate supply. The reason that aggregate demand shifts is that there is an increase in the demand for money and it brings forth an increase in the supply of money.