Essays on Business Cycle, Fiscal Policy, and Other Questions Assignment

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The paper "Business Cycle, Fiscal Policy, and Other Questions" is a wonderful example of an assignment on macro and microeconomics. Inherent fluctuations in economic activity are what connote the business cycle in a broad term. Macroeconomics has a long tradition of measurements of business cycles and the founder of the National Bureau of Economic Research (NBER) Wesley Mitchell (1927) first provided a framework for the same. Both defined business cycles in terms of alterations between periods of recession and expansion, which are considered as two alternating phases of the cycle. In other words, economic activity's transitory fluctuations from a “ permanent trend” constitute these changes.

In this cycle recessions lead to transitory fluctuations in output that are negative; although the fluctuations might differ in magnitudes and shapes depending on the type of cycle involved. An asymmetric shape is closely linked to unemployment, a measure of economic slack, and capacity utilization. This holds true even when univariate analysis pertaining to the gross domestic product is used to measure the cycle. In the macroeconomic parlance, this is known as a model-averaged business cycle which involves univariate dynamics of the real GDP.

The level of capacity utilization and unemployment rate are considered as the two important variables of this cycle. These two variables are presumed to move as the business cycle moves but cannot be said to provide broad measures of real GDP's economic activity (Hamilton, 1989). Typically levels of unemployment, inventories, and plant utilization move along with the four phases of the business cycle which are peak, recession, trough, and expansion. The fluctuations entail economic shocks, a decrease in employment and output, and sticky downward prices.

Furthermore, unemployment creates clutter in the types of efforts the unemployed take, which includes individuals who are either searching jobs or looking to take jobs soon; individuals who are struck by structural unemployment problems involving changes in the demand for the workforce; and individuals who are struck by cyclical unemployment issues typified by the recession phase of the business cycle. Those hurt by the fluctuations include fixed-income receivers, savers, and creditors.


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