Business Cycle in Economics - Doc

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Added on 2021-05-30

Business Cycle in Economics - Doc

Added on 2021-05-30

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Running Head: ECONOMIC ASSIGNMENT Economic AssignmentName of the StudentName of the UniversityCourse ID

ECONOMIC ASSIGNMENT 1Table of ContentsIndian economic growth and stages of Business cycle....................................................................2Nominal GDP per capita and real GDP per capita..........................................................................5References........................................................................................................................................9Appendix........................................................................................................................................10Table 1: GDP and per capita GDP.............................................................................................10Table 2: Per capita GDP: India and Australia...........................................................................13

ECONOMIC ASSIGNMENT 2Indian economic growth and stages of Business cycleFigure 1: GDP and Per capita GDP of IndiaFigure 1, describes the trend in growth of gross domestic product and per capita grossdomestic product. GDP and per capita GDP is evaluated both in nominal and real terms. GDP atcurrent US dollar represents nominal GDP while GDP in constant US dollar measures the realGDP (Agénor & Montiel, 2015). The per capita GDP is a measure of average income in a nation.Both the measures of GDP and per capita GDP shows an overall rising trend. The GDP inconstant US dollar lies above the measures at current US dollar. For capita GDP as well a similartrend is observed were per capita GDP measured in constant US dollar is greater than thatmeasured in current US dollar. The absolute value of GDP and per capita GDP though shows a

ECONOMIC ASSIGNMENT 3relatively smooth trend; the growth rate fluctuates widely. The fluctuation in growth rate can beexplained using the theory of business cycle.Business cycle is defined as a cyclical fluctuation in the economic activity marking phasean alternative trend of upswing and downswing. The four phases of business cycle are expansion,peak, contraction and trough. The phase of expansion is identified as one where economyexpands as reflected from rapid expansion of output, employment and a general upward pressureon price. The highest point of expansion is defined as peak (Bernanke, Antonovics & Frank,2015). It is the point where the economy attains maximum feasible output along with fullemployment with an obvious inflationary pressure. After reaching the peak, the economygradually slows down with a decrease in level of employment and a downward pressure on pricelevel. The slow down continues until it reaches to the lowest point. At this phase, the economyhits the bottom such that expansion and contraction emerge and a new cycle starts.Figure 2: Trend in GDP growth rate

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