Question

Respond to the following prompt in a post with a minimum of 100 words, then comment on at least ONE other posts. While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 quarters. Would you describe the economy as booming, recovering, or in recession during the last few years? Why?

Answer 1

Answer) Given statement is absolutely true,when we talk about economy,we have to understand 2 things,first is long term growth or decline and second is business cycle wrapped around this long term period of growth and decline,when we talk about business cycle we look at period of expansion followed by peak then contraction and then trough and then again cycle repeats,during repetition of these cycles,economy is in boom or declining phase in long period but these business cycles are small corrections,consider this ,economy is booming,there is high demand and high employment but at a point demand reaches its peak and inflation becomes too high,so demand decreases for short period leading to contraction followed by trough and then again demand picks up,thus in long run demand and growth is up but there will be short periods where it will decline as described above.

Now let us look at some of the parameters over last 12 quarters though we have to keep in mind past 2 quarters we have been facing a pandemic ;when we talk about unemployment rate it was 4.5% in start of 2017,where at start of 2020 it was 3.5% or so,not counting recent pandemic induced high figures of double digit unemployment,rate from 2017 to 2020 has not drastically changed but there have been ups and downs during this period,similarly if we look at GDP growth and inflation rate we experience similar trends with average growth of 2% per year with some ups and downs.

I would say economy is booming in the long run if we look from 2008,it has seen some highs and lows as based on explanation of business cycles above but long term trend for past decade or so has been very strong.

Answer is complete.Thank you!