Explain the microeconomic foundations of the Real Business Cycle model,and the modernDSGEapproach to studying economic fluctuations.The equilibrium of the DSGE model is characterisedby the following equations.Constraints:ππ‘=πΆπ‘+πΌπ‘πΎπ‘+1=πΌπ‘+(1βπΏ)πΎπ‘ππ‘=π΄π‘πΉ(πΎπ‘,ππ‘)lnπ΄π‘=πlnπ΄π‘β1+ππ‘Firms:π΄π‘πΉπΎ(πΎπ‘,ππ‘)=ππ‘+πΏ=π π‘βπΎπ‘π=πΎπ‘π(π΄π‘,ππ‘)π΄π‘πΉπ(πΎπ‘,ππ‘)=ππ‘βππ‘π=ππ‘π(ππ‘,π΄π‘,πΎπ‘)Households:π’πΆπ‘(πΆπ‘,1βππ‘)=π½πΈπ‘[(1+ππ‘+1)π’πΆπ‘+1(πΆπ‘+1,1βππ‘+1)]π’ππ‘(πΆπ‘,1βππ‘)=π’πΆπ‘(πΆπ‘,1βππ‘)ππ‘βππ‘π =ππ‘π (ππ‘,πΆπ‘)Explain and use these equations to describe an economic cycle triggered by a persistent shock to totalfactor productivity(TFP). In as much detail as possible explain how the model can be used to generate thestatisticsof an artificial cycle and how the stylised facts of real world fluctuationsare obtained. Discuss howsuccessful themodel is at matching the stylised facts.