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CH8-10.03.09 - The Peak or Boom Recovery leads to the peak...

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10.03.2009 CHAPTER 8 MACROECONOMIC INSTABILITY In an ideal economy: Steady Growth Stable Prices (no inflation or deflation) Full Employment The Business Cycles (or Trade Cycles-Konjektür Dönemleri İş Çevrimleri ) Phases of the Cycles Recession: Economic activity such as production and consumption decline. If GDP is decreases, employment is decreases. Prices? (Downward inflexible) Trough: It is final stage of a recession. Economic activities are out their lowest level. It may last long. Recovery: It is the rise in economic activities. Price may rise. Mild inflation.
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Unformatted text preview: The Peak or Boom: Recovery leads to the peak, which is a maximum value for GDP. Employment is usually full. -> Further growth may lead to inflation. -> It is difficult to maintain the economy at this level. Causation: The causes of business cycles may be classified as a. Exogenous (Originally from outside) Example: wars, inventions etc. b. Endogenous Factors: Relate to the own and internal dynamics of the economy. Example: Increase in AD. Non-Cyclical Fluctuations There are some seasonal fluctuations. These seasonal trends are normal and not cycles....
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