1. Business cycles involve fluctuations around full employment real GDP. List an

Question

1. Business cycles involve fluctuations around full employment real GDP. List and explain at least three of the possible causes. Demand for goods and services is more or less than the firm. 2. If the Great Recession bottomed in 2009, about when would you guess that the next recession would occur? 3. What are the leading economic indicators that might signal the onset of the next recession? 4. Is supply-side economic activity more important than demand-side economic activity when it comes to predicting changes in the direction of the economy?

Explanation / Answer

1.

We know that the business cycle we means that wide economic flactuations in production and economic activity over several months or years. It will be affects the lonng run growth of the economy. The indicators of business cycle is rise and fall in the real GDP of the economy. Generally there are four phases of business cycles. That is,

1. Recession

2. Recovery

3. Expansion

4. Boom

Examples of business cycles

1. Australlian business cycles- We know that the Australlian economy faced an inflationary gap in 2007 and full employment in 2008 and again recessionary gap in 2011.

2. There are more than $1 billion losses in UK since 2008 and almost 5,000 job losses in the same periode

3. The attendance of the cinema theatre increases every year in UK

2.

We cannot exactlly predict when the next recession will occur. But we will sure that it will occur in coming years. We know that the last recession is occured in 2007.

3.

We know that the business cycles theory there are three economic indicators are given the signal of the next recession. That is,

1. Leading

2. Coincidents

3. Lagging

These three variables are correctly predict the past economic recessins as well.

4.

Supply side economics

We know that the supply side economics is popularly known as Reaganomics. Becuase these ides are popularized by the Ronanld Regan US president. The central idea of supply side economics is the tax cut for investors and incentive to provide the enterprenours to save and invest. The three pillars of supply side economics is that:

1. Tax policy

2. Regulatory policy

3. Monetory policy

These three pillars are provided the basic idea of production of goods or supply of goods and services in the economy.

Demand side economics

The demand side Economics explains that the main force of affecting overall economic activity is consumer demand for goods and services. This schools is simply says that the Keynesian schools. The central theme of demand side economics is the aggregate demand. The Aggregate demand includes consumption, Investment, government spending and the net exports. Here the government have the greater role for the fluatuations in the economy.

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