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Chapter 10 (Business Cycles)
Business Cycles (business Flucuations)
The ups and downs in economy wide economic activities are called business cycles or busyiness fluctuations.
When business fluctuations are positive they are called expansion, the opposite of expansion is contraction which is slow down in the pace of national economic activities.
Phases of the business cycle over a several year period
1. A peak is when business activity reaches a temporary maximum with full employment and near capacity output.
2. A recession is a decline in total output; income, employment, and trade lasting six months or more.
3. The trough is the bottom of the recession period.
4. Recovery is when output and employment are expanding toward full employment.
Causes of business fluctuations
A. Internal (endogenous) theories
1. Innovation theory
2. Psychological theory
3. Monetary theory
B. External (exogenous) Theories
1. War theory
a. Examples are WW2, the Korean war, and the Vietnam......

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