Macro Economics - Business Cycles - 1410 Words

Business Cycles Business Cycles ââ€" º The value of real GDP over time shows periodic fluctuations in its movement ââ€" º The business cycle refers to the periodic fluctuations of economic activity about its long term growth trend ââ€" º The Business cycle is the more or less regular pattern of expansion (recovery) and contraction (recession) in economic activity around the path of trend growth. ï‚ § At cyclical peak, economic activity is high relative to trend ï‚ § At a cyclical trough, the low point in economic activity is reached. The business cycle Potential output Real GDP 3 3 2 2 4 41 1 O fig Time Trend output 4 Actual output 4 Business Cycles ââ€" º The trend path of output is the smooth path of†¦show more content†¦ers Interest Rate Spread Delivery Times Stock Prices New Building Permits Average Work Week Unemployment Claims Indicators of Business Cycle Co-incident Indicators Payroll employment Personal income Manufacturing and trade sales Industrial production Indicators of Business Cycle Lagging Indicators Unemployment duration Inventories to sales ratio Inflation rate for services Outstanding commercial loans Consumer credit to personal income ratio Prime interest rate Need for Macroeconomic Stability ââ€" º Large fluctuations in output, employment and inflation add to uncertainty for businesses and consumers, and can reduce the economy s long-term growth potential ââ€" º Stability allows businesses, individuals and the government to plan more effectively for the long term, improving the quality and quantity of investment in physical and human capital and helping to raise productivity Stabilization Policies ïÆ'Ëœ Stabilization Policies: Actions taken to impact aggregate demand to moderate the expansion and contraction phases of the business cycles ïÆ'Ëœ Stabilization policies are fiscal and monetary policies used to combat the cyclical movements Purpose: ïÆ'Ëœ During an economic expansion moderate the growth rate of aggregate spending (equitable distribution) ïÆ'Ëœ During an economic contraction (recession) increase the aggregate spending Stabilization Policies ïÆ'Ëœ Monetary Policy: Aims toShow MoreRelatedBusiness Cycles Macro Economic Conditions And Its Impact Towards The Country1396 Words   |  6 Pages Economics for Business Essay Question Lecture Name - Maruf Mostafa Student Name - Wastu Kankanamalage Gayani Chathurangi Maithripala Student ID – 11621711 Word Count – 1000 Introduction This essay will mainly focus, discussing business cycles in macro-economic conditions and their impact towards the country. 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