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The Business Cycle. By: Malcolm Thomas. Definition . The recurring and fluctuating levels of economic activity that an economy experiences over time. The five stages of the business cycle are growth, peak, c ontraction, recession , and recovery. Understanding the stages .
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The Business Cycle By: Malcolm Thomas
Definition The recurring and fluctuating levels of economic activity that an economy experiences over time. The five stages of the business cycle are growth, peak, contraction, recession, and recovery
Understanding the stages The economy usually starts low and first begins to grow or expand. Jobs are plentiful, people are employed and the demand for food, consumer appliances and services begin to increase. Then the economy will hit its peak, in which, the economy seems to be perfect. Coined by Alan Greenspan the country will in a stage of “irrational exuberance” The economy will begin to slow down in a period of time known as a contraction
(Continued) • Then the economy will continue to fall until it basically hits bottom and enters a recession • Then it begins to recover (usually using the strive as a springboard) and then re-enters the period of growth starting the whole cycle again
Different economic theories RBC- (Real Business Cycle) Real Business cycle theory is a class of theories explored by John Muthin 1961. The idea is to study business cycles with the assumption that they were driven entirely by technology shocks. Austrian Theory- (ABCT) The Austrian Business cycle theory explains the idea that excessive bank credit is the root to an inevitable business cycle which includes lower savings and speculative economic bubbles.
