One important factor of business fluctuations is changes to aggregate Demand. Like I said before, any changes made to consumption, investment or government expenditure will change aggregate demand which as obvious will have fluctuations in Business cycle. Though we are having a combine topic of business cycle and aggregate demand. Let me first explain the basic elements of what Business cycle or fluctuations are:
Definition of Business Cycle
With reference to the book of Samuelson “Business Cycle are economy-wide fluctuations in total national output, income and employment , usually lasting for a period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of the economy.”
Phases of Business Cycle
There are two main phases of Business cycle:
- Recession
- Expansion
And two turning points
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