Course

Business Fluctuations

Instructor: Alex Tabarrok, George Mason University

This is " Intro to Business Fluctuations " from our Principles of Economics: Macroeconomics course. Economic growth doesn’t happen at a steady pace; there are ebbs

This is "Intro to Business Fluctuations" from our Principles of Economics: Macroeconomics course.

Economic growth doesn’t happen at a steady pace; there are ebbs and flows. Prosperity on the national level depends on a country having good institutions in place. The factors of production – human capital, physical capital, and ideas – are also critical. And these variables often change, sometime drastically.

In the United States, economic growth has averaged at about 3.2% for the past sixty years. But if you Google “US economic growth FRED,” you’ll quickly see that it’s not a smooth trend up. Instead, there are plenty of peaks and valleys, even though the U.S. has a relatively stable economy. Economists refer to these ups and downs around a country’s long-term GDP growth trend as “business fluctuations.”

“Recessions” are significant and widespread declines in employment and real income. But not only do people become unemployed during a recession, but capital and land often go un- or underused. This suggests that an economy is operating below its potential because resources are being wasted.

Recessions, large or small, are less than ideal states for an economy. We want people and resources well employed to produce more prosperity.

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