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Essay / Research Paper Abstract
This 4-page paper focuses on the concept that the robust GDP experienced by the U.S. during the early 1990s (and the increase in equity value) ended up eventually bringing down the business cycle during the latter part of the decade. The paper discusses why this was so, bringing in several theories of GDP-business cycle-investment relationships. Bibliography lists 3 sources.
4 pages (~225 words per page)
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Unformatted sample text from the term paper:
experts and economists proclaiming an end to the business cycle by the end of the decade. As we look back from the first decade of the 21st century, we can
see these nay-sayers were absolutely correct - ultimately, the business cycle did drop and the U.S. (along with the rest of the world) went into a recession.
It did not, however, take guesswork to figure that out - because macroeconomics is so cyclical, a rising GDP along with a rising value in
investments and equities would eventually had signaled the end of a cycle. To better understand this, lets explain the business cycle and its relationship with the GDP.
Business cycles, in their most basic form, are defined as "recurring changes in the level of business and economic activity over time" (Ruby,
2003). This business activity is measured in terms of real income (also known as "real" GDO) (Ruby, 2003). GDP, in the meantime, stands for "gross domestic product," which measures the
specific output an economy generates. Output can only be generated if demand for consumables is present. Such demand only occurs when consumers are able and willing to spend the money
on durable goods and other types of goods. The more money a person has (goes the theory), the more he/she is willing to spend on goods. This expands the economy
because more people are needed to produce the goods. The more people who are hired for jobs, the more money they have to spend, and the more theyre willing to
spend it on goods . . . and so on. But the cycle eventually has to end, and this is what happened during the 1990s.