Business Cycle
We have learned that a competitive market always experience
business cycles in the short run. The output fluctuate around the
upward trend, creating four period: recovery(from trough to trend),
expansion(from trend to peak), contraction(from peak to trend) and
recession(from trend to trough) .
The cycle is usually self enforcing, when we are in the expansion,
asset price goes higher and higher, so as the value of the
collateral, people become optimistic and inclined to engage in the
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