ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The business cycle model shows how a nation’s real GDP fluctuates over time, going through phases as aggregate output increases and decreases. Over the long-run, the business cycle shows a steady increase in potential output in a growing economy.

Detailed explanation-2: -Economic growth can be caused by random fluctuations, seasonal fluctuations, changes in the business cycle, and long-term structural causes. Policy can influence the latter two. Business cycles refer to the regular cyclical pattern of economic boom (expansions) and bust (recessions).

Detailed explanation-3: -The business cycle is a term used by economists to describe the increase and decrease in economic activity over time. The economy is all activities that produce, trade, and consume goods and services within the U.S.-such as businesses, employees, and consumers.

Detailed explanation-4: -The most common way to measure the economy is real gross domestic product, or real GDP. GDP is the total value of everything-goods and services-produced in our economy.

Detailed explanation-5: -The second causal relationship is an effect of economic growth on business cycles. Potential growth is thought to be a proxy of the trend of economic growth. It is the rate of “average supply (potential output)” from which fluctuations arising from business cycles are averaged out.