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Conversely, any economic quantity that is negatively correlated with the overall state of the economy is said to be countercyclical. [3] That is, quantities that tend to increase when the overall economy is slowing down are classified as 'countercyclical'. Unemployment is an example of a countercyclical variable. [4]
An example of a counter-cyclical policy is raising taxes to cool the economy and to prevent inflation when there is abundant demand-side growth, and engaging in deficit spending on labour-intensive infrastructure projects to stimulate employment and stabilize wages during economic downturns.
A cyclical (temporary) deficit is a deficit that is related to the business or economic cycle. The business cycle is the period of time it takes for an economy to move from expansion to contraction, until it begins to expand again. This cycle can last anywhere from several months to many years, and does not follow a predictable pattern. [11]
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
Fiscal cyclical asymmetry is based on national or international changes to fiscal policy as a result of cyclical intervention in money markets or currency exchanges. [1] A simple example is the reaction of the US Federal Reserve to raise interest rates when the dollar performs too well against other currencies such as the euro and the yen.
A vicious circle (or cycle) is a complex chain of events that reinforces itself through a feedback loop, with detrimental results. [1] It is a system with no tendency toward equilibrium (social, economic, ecological, etc.), at least in the short run. Each iteration of the cycle reinforces the previous one, in an example of positive feedback. A ...
A bull market is the opposite of a bear market and occurs when asset prices rise significantly over a long period of time, commonly defined as a 20% or more increase from their most recent low. A ...
The flow of money is shown with purple, and the flow of goods and services is shown with orange. Money flows in the opposite direction from goods and services. [1] Basic diagram of the circular flow of income. The functioning of the free-market economic system is represented with firms and households and interaction back and forth. [2]