What is the connection between macroeconomics and business cycles?
Business cycles are studied in macroeconomics. Unlike microeconomics, which focuses on the consumption and manufacturing patterns of individual people, businesses and government entities, macroeconomics examines patterns and trends affecting the economy as a whole. Economic growth and decline are commercially associated with the overall state of the country's or region economy and are more suitable for macroeconomic studies. Trends associated with trade cycles such as expansion, contractions and depression are monitored and analyzed by two types of macroeconomics: Keynesian and classic. The causes of business cycles can be associated with aspects of macroeconomics such as full employment and inflation. Makroeconomic and business cycles are often used by economic models and terms such as Okun's law, gross domestic product (GDP) and unemployment rate.
Expansion is maintained by economic growth of six months or more as a result of capital investment in enterprises or equipment; Technological advances that pomThey are more efficiently supported by economic growth more efficiently. Macroeconomics defines contraction or recession as a period of economic decline that lasts more than six months. This is marked by a loss of employment or a lack of consumer expenditure. Depression is a longer contraction of the economy.
Keynesiani believe that problems associated with macroeconomics and trade cycles can be controlled or resolved by government intervention. For example, during the economic contraction period, Keynesians advocate lower taxes and increased government expenditures for stimulating economic growth. Classical macroeconomists oppose government intervention and believe that the natural law of supply and demand will solve all problems associated with the business cycle.
Full Employment of Means All production factors such as capital, technology and humans are used in the most effective way. Is associated with economic eXpanzes A is supported by an increase in population and improved technology. Increasing consumer or government expenditure also leads to economic growth. As consumer demand for goods and services increases, more jobs are formed and employees are increasing. However, if this type of expenditure continues, prices may be too high, leading to inflation. This reduces consumer expenditures and causes wage decreases and job availability.
When studying macroeconomic and business cycles, economists use GDP and unemployment indicators. GDP measures the total value of all goods and services created by countries or region. During the period of economic growth, GDP and unemployment rate decrease. Okun's law, a macroeconomic formula, states that unemployment rate decreases by half a percent for every percentage of GDP increase. An alternatively high level of unemployment indicates economic contraction.