Chapter 18, Problem 2P

To determine

To explain:

Business Cycles.

Concept Introduction:

Business Cycle:

Every economy has phases in its output growth. Each phase is characterized by unique features in the economy. Sometime output growth is high, sometime it is low and sometime it falls to great level. Different business cycles are:

Recession:

Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession there is huge unemployment and fall in production of goods and services. Recession Slows down the business activities.

Depression:

When the recession is for longer duration it is known as depression. The main reason for such phenomenon is the lack of demand and low investment level.

Boom:

This is the phase of business cycle when the output growth is very high. During this period there is inflation and high aggregate demand in the economy.