In its comprehensive long-term series of studies for the United States, Britain, France, and Germany, the National Bureau of Economic Research has documented the time and amplitude of repeated non-seasonal fluctuations of multiple aggregates and aggregates covering a variety of processes economic.
Based on the consensus elements in these movements, a chronological flow from the lowest point to the highest point in macroeconomic activity was constructed for these four countries. There is much evidence of penetration and similarity of business cycles.
However, just because these individual cycles share important common characteristics does not mean that they are all the same. Historical experience includes:
Some immediate economic boom achievements.
Some extended depressions.
Some long periods of relative calm.
In short, records show variety in the many ways the business cycle is measured. Although most recessions were transient and mild, some were long and severe. Although most of the expansions were neither too long nor too powerful, some had one or both of these attributes.
A reflection that the US economy tended to be less volatile after World War II than before was recently being challenged. In particular, economic regressions became somewhat shorter, much softer and less frequent, while with both real increases, inflation rose much more persistently. When the business cycle’s potential modernist resources are considerable, they seem to form an overly long list.
Some hypotheses have been examined and subsequently affirmed, and their selection has a very significant impact on the overall analysis of business cycles. The following factors have probably contributed significantly to the stability that has led to subsequent economic growth:
1. Changes in employment transformed into a less cyclical activity, mainly manufacturing services in the industry. This is set in line with the net destabilizing role of changes in business inventory and the purchase of durable goods.
2. The growth role of automatic (mainly fiscal) stabilizers.
3. Reducing the frequency and intensity of financial crises. The implication here is that such problems can worsen (not necessarily cause) business cycles.
4. Some favourable fiscal policies (mainly tax).
5. Reducing the volatility of monetary growth
6. Greater confidence of private economic agents, influenced by the self-observed business cycle’s modernization, encouraged good behaviour in more sustainable economic growth. This suggests an endogenous and self-assessing role that tended to reinforce positive (or negative) macroeconomic trends.
“Dynamic” elements in the business cycle: Some illustrations
The essential components endogenous to business cycle models are valuable so that the latter is not dependent on theoretically and empirically unexplained shocks unnoticed from the outside. It is not just an assumption that these elements are essential in the economy’s dynamic construction but also a provable truth. But it should be noted at the outset that fully articulated, and self-centred formal models are generally small, abstract, and of uncertain value in world interpretation.
The reason lies in the limitations of the mathematical complexity for constructing larger models of this type. In any case, economists have many genius constructs, but obstructive blocks are built to build a more general theory due to the fragmentation of other ideas.
Our goal is not to give these complex theories as we would not be able to do it due to our unprofessionalism in this field. Our goal is to provide some fundamental notions that will help us build a solid, informative thesis.
Here are some theories:
It may be necessary at this point to say a few words about important schools of thought, which hold to the idea from different points of view that the chronic tendency of contemporary societies towards underemployment should be traced in the direction of under-consumption; this is to say to social practices and a distribution of wealth which results in a tendency to consume, improperly reduced. A school of economic thought finds the solution to the business cycle not in increasing both consumption and investment but reducing the supply of the worker seeking employment, which means by redistributing the existing volume of work without increasing output.
Whether we reach approximate figures for illustration purposes, the average output level for today is 15% below what it should have been with a full continuing employment level and, if 10% of this output represents net investment and 0% of its consumption, if further the net investment should be increased to 50%, to ensure full employment in the existing tendency to consume, so with complete work the output would increase from 100-115, consumption from 0 to 100 and investments net of 10-15; then, perhaps we can aim at modifying the propensity to consume so that full employment can increase from 0 to 103 and net investment from 10 to 12%.
Another theory came from studies conducted by Jevons, where an explanation was found for agricultural fluctuations due to the seasons rather than industry phenomena. Influenced by the above approach, this is presented as a unique view of the problem. Today’s fluctuation in agricultural stocks, between one year and the next, is one of the largest individual elements between the causes of changes in the current investment rate. At the time Jevons wrote, this factor must have been significant to all other aspects. Jevons’s theory that the business cycle was mainly an attribute of fluctuations in the harvest domain can be re-emphasized.
When a considerable amount of crop is harvested, it is usually a significant addition to the quantity carried over to the amount carried over into later years. The income of this increase in quantity is added to the farmers’ actual payment and is treated by them in the pure sense of income; In contrast, the rise in income years does not include any flow in the income expenses of other parts of the community but is financed by savings.
This means that the addition to the carrying amount over the years is an addition to the actual investment. This conclusion is not devalued, even when prices fall drastically.
Similarly, when a low level of harvest carrying is carried over to current consumption, a corresponding portion of consumer income-expenditure does not generate any farmers’ actual income. This means that what is taken from the amount carried includes a corresponding reduction in the current investment. Thus, if investment in other directions is considered constant, the difference in aggregate investment, in which there is a substantial discount or withdrawal from it, can be enormous.