BUSINESS LIFE CYCLE



Business Life Cycle



Business Life Cycle

Business cycles of an economy refer to the fluctuations in outputs and employment level of that economy. Almost all economists agree upon the fact that output remain at natural rate in the long run whereas there exists fluctuations in the short run that are not predic . These random and irregular fluctuations in output from its natural rate are termed as business cycles. Business cycles are followed by contractions and expansions in economic activity and measured by changes in real GDP.

There exist a lot of questions regarding business cycles and thus different school of thoughts. The economists disagree upon that is why output deviate in the short run not in the long run, why the same resources yield different outputs, how some economies have more while others have fewer fluctuations in output and what factors work behind the booms and recessions.

There are many theories to explain the causes of business cycles the prominent of which are disequilibrium models (Keynesian) and equilibrium models (Monetarist), these models explain business cycles emphasizing on the factor demand for labor that there is lack of demand for workers and consider it the cause by stating that labor market do not clear in the short run and adjustments take time because wages and prices are sticky. If output goes down it is due to that market fails to clear pushing the economy into recession.

On the morning of September 11, 2001, a small group of dedicated fanatics hijacked four commercial airplanes in flight, crashed three of them into buildings symbolic in various ways of what they found offensive about the United States, and changed the course of American history. Shortly after this occurred, a group of CRS analysts was called upon to assess the possible effects of the terrorist attacks on the U.S. economy and the ability of the government to deal with them. This was but a small part of a much larger CRS effort on various aspects of terrorism that became an on-line electronic briefing book. This briefing book has been extraordinarily successful and has been used thousands of times by congressional staff. Over time, most of the economic entries served their purposes and were withdrawn.

While the studies of the CRS staff on the economic effects of terrorism were very useful, they were not designed to address other important questions related to this tragedy. For example, what did we learn from this experience that might be useful if the United States were to experience other acts of terror? While we know how the government responded in this instance, were alternative responses available?

If they were, what were they and why were they not used? Does this episode suggest that new remedial stand-by programs should be put in place now? Or are acts of terrorism likely to be so unique that one-size-for-all remedial programs are unlikely to be useful? It is to address such questions, that CRS presents this retrospective assessment.

When the terrorist attack occurred it was known that ...