Answer to Question #74245 in Macroeconomics for Omar

Question

1-Define the business cycle. Why is reducing the severity of the business cycle a common
goal of policy makers?
-
2-What is the connection between long-run economic growth and a country’s standard of
living? Give at least three examples of living standard indicators and their development.

Answer 1

1. Business cycle is the consequent changes in the output of products and services in a national economy. Business cycle is usually measured with GDP. There are two main stages in a business cycle - rise and decline. Decline is traditionally associated with the rise of unemployment and growth of inflation. In turn, these factors can cause significant social consequences. That is why policy makers are interested in smoothing of severity of a business cycle.
2. Long-term economic growth creates preconditions for the growing living standards. It becomes possible, since society gets morefinancial resources to increase these living standards. Three main living standards are lastitude of life, availability of education and health care