Question

Examine the link between the business cycle and the four macroeconomic objectives.

Answer 1

Over time, real GDP increases. Some years it increases faster than average. Some years it increases slower than average. Some years GDP declines. These waves of peaks and troughs are describe as the business cycle.

In this section, we will explore economic growth, which is the increase in economic activity that occurs over the long term. We measure economic growth by real GDP per capita, but growth is a broader collection of social and economic changes, which lead to an increase in the standard of living.

You’ll see why growth happened rapidly following the Industrial Revolution, and why growth remains important today. You will also determine what factors lead to improvements in standards of living.