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Business Cycle

ASSIGNMENT 1

Introduction

In macroeconomics, business cycle played an important role to show what a national economy is going; therefore, this essay will define what business cycle is and its characteristics. Besides, all of variables such as Real Gross Domestic Product (RGDP), inflation and unemployment rate and their behaviour in the business cycle will be also demonstrated in the second part. The final part of this essay will analyse and compare the situation of Australian economy and USA economy in period of 10 years since 1998 based on the concept of “the business cycle”.   In addition, this is the writer’s opinion about the business cycle relied on these above data about exhibit Australian and USA economy performance.

WHAT IS THE BUSINESS CYCLE?

According to Burns (1946, p.3): “business cycle is a kind of fluctuation happened in aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring about the same time in many economic activities, followed by similarly general recessions, contractions and revivals which merge into the expansion phase of the next cycle; this sequence of changes is recurrent but not periodic…” Besides, business cycle could be easy to understand that this is periodic fluctuation in the level of GDP that are involved nominal GDP and real GDP (RGDP)

In the economic, business cycle played an important role to show the economy’s situation and where it is going. In addition, it is also express a magnitude of the peaks and troughs; and the duration of the cycle.

Characteristics of Business Cycle

There are four phases of the business cycle:

  1. The upturn or rehabilitating phase: the economy starts to recover

  2. The expansion phase: during this phase the economy is growth rapidly or we called this the booming time.

  3. The peaking out: the economy is going down or even ceases

  4. The recession or slump phase: there is no growth and...