macroeconomics 2/3

What is the business cycle?

The business cycle refers to the natural fluctuation of economic activity over time.

What are the four key stages of the business cycle

Expansion, peak, contraction, and trough

What key factors are involed in expansion in stage one of the business cycle

Economic activity, unemployment, inflation, and business climate

Why happens to economic activity in the expansion stage

Rising GDP increases consumer spending and grows business investment

What happens to unemployment in the expansion stage

job creation improved and unemployment rates decline

What happens to inflation in the expansion stage

moderate inflation may occer as demand rises

What happens to business climate in the expansion stage

optimism prevails, and businesses expand production.

What happens in economic activity in the peak stage?

the economy reaches its maximum output, signaling the end of expansion

What happens to unemployment in the peak stage?

Unemployment is typically at its lowest

What happens to inflation during the peak stage

prices may rise rapidly, and asset bubles can form

What happens in the business climate in the peak stage?

The market is overheated, often driven by overconfidence.

What happens with economic activity during the contraction period

GDP declines, consumer demand weakens, and business output slows.

What happens with unemployment during the contraction period

Infaltion may slow or turn into deflation

What happens in the business climate during contraction?

Uncertaintly and pessimism increase, reducing investment

What happens in economic activity during the trough period.

The economy hits its slowest point before recovery begins

What happens to unemployment in the trough stage

Unemployment peaks, and economic confidence is low

What happens to infaltion during the trough period

Inflation may stabilize or even decrease

What happens with the business climate during the trough period

This phase often prompts policy interventions to stimulate growth

What does it mean if the business cycle is cyclical

Economies naturally move through these stages over time. Each phase can vary in duration and intensity depending on factors liek government policy, global events, and technological chnages.

What are non cyclical fluctuaions

Refers to changes in economic activity that are unrelated to the typical business cycle.

Describe how a non cyclical fluctuation works

The yare often sudden, unpredictable, and caused by external factors

What re key characteristics of non cyclical fluctuations

irregular and unpredictable, external triggers, impact varies

What is irregular and unpredictable in non cyclical flucatuations

They dont follow the standard business cycle stages

What are external triggers of noncyclical fluctuations

Often caused by unexpected events rather than internal economic trends

What impacts vary in non cyclical fluctuations

These fluctuations can affect specific industries, regions, or the entire economy

What are the 5 causes of non cyclical fluctuation

Natural disasters, geopolitical events, technological breakthrough, pandemic and health crises, and finacial crises

What are the Short term impacts of non cyclical fluctuations

Many non cyclical events cause temporary disruptions but may not lead to long term economic downturns

What are long term impacts of non cyclical fluctuations

Some shocks, like major technological inovations, can permanently alter economic landscapes

What are causes of the business cycle

Caused by a combo of internal and external factors the influence economic activity; demand-side factors, supply side factors, financial factors, political and policy changes, external shocks, and psychological factors

what are the demand side factors of a business cycle

Fluctuations in consumer spending, business investment, and government spending can trigger changes in economic growth; Consumer confidence, investment fluctuations, fiscal policy, monetary policy

What is fiscal policy

Government actions like tax cuts or higher taxes can slow it down

What is monetary policy

;Interest rate chnages by central banks can influence borrowing, spending and investement

What are the supply shock factors in the business cycle

Disruption in production, resoruces, or costs cna cause economic fluctuations; raw material shortages, wage changes, technological advancements

What are financial factors to the business cycle

Instability in financial markets can amplify economic cycles; credit booms and busts, stock market volatillity

What are policitcal and policy changes

Economic policies and political decisions can influence business cycles; regulatory changes, tarde policies

What are external shocks of business cycles

Unforseen events otuside the economic system can cause abrput fluctuations; natural disasters, pandemics, geopolitical tensions

What are psychological factors of the business cycle

Emotions like fear, optimism, or speculation can heavily influence market behavior; herd behvior, and speculative bubbles.

What is the real business cycle theory?

Refers to fluctuations in economic activity that are primarily driven by real shocks rather than changes in aggregate demand or monetary policy

What are key factors to the real business cycle theory?

real shock and market clearing/flexible prices