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Economics 2002.01 Application Paper - Document preview page 1

Economics 2002.01 Application Paper - Page 1

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Economics 2002.01 Application Paper

Description: This paper applies economic principles to real-world situations and analyzes economic issues.

Chloe Martinez
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Economics 2002.01 Application Paper - Page 1 preview imageNameEconomics 2002.01 Application PaperBased on the discussion of business cycles in your assignment, explain the four phases of thebusiness cycle—expansion, peak, contraction, and recovery. How do these phases relate to thethreemain goals of macroeconomics: full employment, stability, and economic growth?Additionally, using the macroeconomic data presented for the U.S., assess the current phase ofthe economy and explain your reasoning. Your response should be between 600-700 words.
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Economics 2002.01 Application Paper - Page 3 preview imagePrinciples of MacroeconomicsEconomics 2002.012Section One: Business CyclesThe threemain goals of macroeconomics are1.Full employment2.Stability; and3.Economic growthProduction of goods and satisfying the needs of people can be achieved when all the availableresources are employed.Resources here do not mean only human, but also include land,capital and organization. When all such resources are properly employed, the problem ofscarcity may not arise. So, full employment can ensure a good economy.Stability means no fluctuation or variation. We always find that the unemployment rate, inflationindex, productionscales etc show changes from period to period. Stability is important as itgives an economy comfort from uncertainty and disruptions.Economic growth is indicated through expansion or increase in production capacity. It can alsobe achieved through increase in quantities of resources used for production. Economicgrowth results in satisfied people and givesthem a better standard of life.Business CycleBusiness cycle inan economy tells about its different phases of growth and decline. Businesscycle has usually four phases which are also known as its components. These are as below:-1.Expansion:-As the name indicates, in this phase the economy grows. This comes withbetter and more utilization of resources resulting in positive and increased outputsatisfying human needs. Unemployment falls and the purchasing power of people growsresulting increase in inflation.2.Peak:-This is considered as the best position for an economy where the unemploymentrate decreases,purchasing power of the people reach to the topand further expansion of
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Economics

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