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MACRO ECONOMICS RESEARCH ASSIGNMENT Economic crises occurred throughout the 19th century By the latter part of the century a number of observers had come to the conclusion that there was a regular wavelike pattern to crises and they called this pattern the business cycle A cycle with its regular and periodic fluctuations needed an explanation What caused the pattern What forces determined the length and amplitude of the waves Could the cycle be eliminated Business cycles are a type of fluctuation found in the aggregate economic activity of nations business cycles cover the economy as a whole GDP These fluctuations in economic activity are characterized by periods of rising and falling economic health During a business cycle an economy grows reaches a peak and then begins a downturn followed by a period of negative growth a recession that ends in a trough before the next upturn In duration business cycles vary from more than one year to ten or twelve years There are two different views of the business cycle a New Classical economists Believe that the classical model with its market-clearing equilibrium assumptions can be extended to explain economic behavior in the short run b Keynesian Believe that short run fluctuations are most usefully viewed as periods in which the economy is in disequilibrium rather than equilibrium Indicators These try to predict the economic ups and downs before they appear in the official data The Australian Bureau of Statistics Experimental Composite Leading Indicator XCLI a major indicator The XCLI summarises the business cycles present in a selection of economic indicators which had typically shown turning points ahead of the business cycle in GDP from the early 1970s to the early 1990s ABS research found that because the evolution of each expansion and contraction in activity presents a unique combination of features none of the individual indicators has had an unvarying or perfectly stable leading relationship with GDP
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