Business Cycles

Paper Summary:

Business cycle theories have been the topic of discussion for many years. There are several business cycle theories that are reliable and trustworthy, while others are controversial and easily disproved. This paper distinguishes between the different theories of the business cycle. These theories include Keynesian aggregate demand theory, the Monetarist aggregate demand theory and the new classical and new Keynesian theories of the business cycle and the real business theory. In addition, the paper describes the origins of and the mechanisms at work during the expansion of the 1990s, the recession of 2001 and the Great Depression.

From the Paper:

"Aggregate demand simply describes the correlation between the amount of aggregate output and the price height when every other variable is held constant. According to an article entitled "Aggregate Demand and Supply Analysis" from the Keynesian point of view the aggregate demand is determined "in terms of its four components: consumer expenditures, investment (meaning investment in physical capital, not investment in assets) spending, government expenditures, and net exports." The equations that Keynesian use to express an aggregate demand curve is Y = C + I + G + Xn. "

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