Search results
Results from the WOW.Com Content Network
Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion ...
Most business cycle theories focused on a single factor, [9] such as monetary policy or the impact of weather on the largely agricultural economies of the time. [8] Although business cycle theory was well established by the 1920s, work by theorists such as Dennis Robertson and Ralph Hawtrey had little impact on public policy. [ 11 ]
The division into various time frames of macroeconomic research leads to a parallel division of macroeconomic policies into short-run policies aimed at mitigating the harmful consequences of business cycles (known as stabilization policy) and medium- and long-run policies targeted at improving the structural levels of macroeconomic variables.
Keynesian economics advocates the use of automatic and discretionary countercyclical policies to lessen the impact of the business cycle. One example of an automatically countercyclical fiscal policy is progressive taxation. By taxing a larger proportion of income when the economy expands, a progressive tax tends to decrease demand when the ...
The best-known such model is real business-cycle theory, in which business cycles are considered to be largely due to changes in the real economy, unemployment is not due to the failure of the market to achieve potential output, but due to equilibrium potential output having fallen and equilibrium unemployment having risen.
Early real business-cycle models postulated an economy populated by a representative consumer who operates in perfectly competitive markets. The only sources of uncertainty in these models are "shocks" in technology. [2] RBC theory builds on the neoclassical growth model, under the assumption of flexible prices, to study how real shocks to the ...
Business Cycles Business cycles are fascinating. Driven by human nature, business cycles go through phases of expansion and contraction displaying similar ... Understanding Business Cycles
Real business-cycle theory (RBC theory) is a class of new classical macroeconomics models in which business-cycle fluctuations are accounted for by real, in contrast to nominal, shocks. [1] RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment.