Questions on Economic Issues

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Question A The term economic cycle typically refers to fluctuations in production, trade, unemployment, spending, and economic measures over the course of a time period. In capitalism, these fluctuations usually occur between expansion and boom period (rapid economic growth) and periods of decline or stagnation (recession or contraction). They do not follow a predictable pattern and have a number of variables associated. Capitalism, whether simply the term used as Adam Smith's ideal system or the modern trading of wealth and goods/services needs three things to be successful: a market, a means of production, and natural product. The market may be created (we now have multibillion dollar companies that do nothing but create want), or necessary (certain foods, etc.). The means of production is most usually technological, at least in societies that have advanced; and the natural resources may be human or physical. Because of the volatility and number of variables, it is natural that cycles occur. The economy, just like prices of commodities and services, never move in straight lines, but trend upward or downward. Peaks are the tops of the cycle, troughs the bottom. The swings up and down are the central concerns of macroeconomics, particularly the rise and fall of GDP, which tends to mirror changes in other economic indicators. In the economic cycle, though, there are four phases: peaks, recession, troughs and recovery. We can envision this much like a roller coaster, since
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