Business Cycle Theories

Business cycle theories explain the fluctuations in economic activity over time, including periods of growth and recession. They suggest that economies naturally go through cycles due to various factors such as changes in consumer confidence, investment, government policies, and external shocks. Some theories, like the Keynesian view, emphasize the role of total demand in driving these cycles, while others focus on changes in supply or technological innovations. Overall, these theories help us understand why the economy expands, slows down, or contracts, allowing policymakers to implement strategies to stabilize economic growth.