Question

WRITE A 75 WORD RESPONSE

"Business cycles are the "ups and downs" in financial activity, defined in terms of periods of growth or collapse. During growth, the economy, measured by indicators like jobs, production, and sales, is growing in actual terms, after excluding the effects of inflation. Downturns are periods when the economy is shrinking or contracting. Sometimes when business decline down in the society it's widely affected since the individual in the society begin to lose their jobs from left to right. Sometimes this idea of bad things happen makes the individuals have hope that the bad can turn to be good. Since the economy will never be the same. If bad things turn to be unavoidable it leads to many discrepancies in society and helps the society to make a better change for improvement. A business cycle is a short-run, temporary upward or downward movement of economic activity, or real GDP, that occurs around the growth trend and have always been a part of the U.S. economic scene. It is true that by trying to avoid the downs can make things worse because you are just putting off the inevitable periodically. Society deals with business cycles by cutting back when things are tough and spending more when things are good. "

Answer 1

Nope, i do not agree with the statement that the society cut back when the business is in downturn and spends more when things are going good, if we take the government and the fiscal policy into account its just the opposite, if the economy is facing a downturn then the government will be spending more and when the economy is at a boom then the government will be spending less, this is called counter cyclical fiscal policy, and that is done to take the economy out of recession.

Moreover, we have automatic stabilizers that help keep the economy at equilibrium, they are income tax, unemployment compensations etc. this keeps the consumption as close to the productivity line and prevent the effects of a cycle.