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Chapter 6: Q1. (page 246)

Why do we talk about business cycles for the economy as a whole, rather than just talking about the ups and downs of particular industries?

Short Answer

Expert verified

The fluctuations in the entire economy indicate that the economy is suffering through some universal impact of an economic phenomenon. In comparison, variations in specific industries can be due to different reasons. Therefore, business cycles refer to the economy as a whole.

Step by step solution

01

Implications of fluctuations in particular industries

Ups and downs in specific industries will represent the production and employment of the respective sectors. It does not ensure that the whole economy faces similar economic conditions to declare any business cycle.

The fluctuations in particular sectors can result from industry-specific factors such as availability of raw materials, cost of particular raw materials, availability of labor, strikes, technological advancement, market structure, competition, etc.

02

Implications of fluctuations in the entire economy

Referring to the whole economy, fluctuations in output and employment from almost all the sectors occur in a similar pattern indicating a business cycle. When all the sectors show similar impacts of some economic phenomenon, the economy is understood to be passing through a business cycle.

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Most popular questions from this chapter

Which of the following reflect comparative advantage, and which reflect macroeconomic forces?

  1. Thanks to the development of huge oil sands in the province of Alberta, Canada has become a BUSINESS CASE exporter of oil and an importer of manufactured goods.
  2. Like many consumer goods, the Apple iPad is assembled in China, although many of the components are made in other countries.
  3. Since 2002, Germany has been running huge trade surpluses, exporting much more than it imports.
  4. The United States, which had roughly balanced trade in the early 1990s, began running large trade deficits later in the decade, as the technology boom took off.

Describe who gets hurt in a recession, and how.

Many poor countries have high rates of population growth. What does this imply about the long-run growth rates of overall output that they must achieve in order to generate a higher standard of living per person?

Which of these sound like inflation, which sound like deflation, and which are ambiguous?

  1. Gasoline prices are up 10%, food prices are down 20%, and the prices of most services are up 1– 2%.
  2. Gas prices have doubled, food prices are up 50%, and most services seem to be up 5% or 10%.
  3. Gas prices haven’t changed, food prices are way down, and services have gotten cheaper, too.
  1. Which of the following questions involve microeconomics, and which involve macroeconomics? In each case, explain your answer.
  2. Why did consumers switch to smaller cars in 2008?
  3. Why did overall consumer spending slow down in 2008?
  4. Why did the standard of living rise more rapidly in the first generation after World War II than in the second?
  5. Why have starting salaries for students with economics degrees risen sharply of late?
  6. What determines the choice between rail and road transportation?
  7. Why did laptops get much cheaper between 2000 and 2017?
  8. Why did inflation fall in the 2010s?
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