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(BQ) Part 2 book "Macroeconomics" has contents: Business cycles, monetary policy in the short run, fiscal policy in the short run, aggregate demand, aggregate supply, and monetary policy, fiscal policy and the government budget in the long run, consumption and investment, the balance of payments, exchange rates, and macroeconomic policy. | Find more at www.downloadslide.com CHAPTER Business Cycles 8 LEARNING OBJECTIVES After studying this chapter, you should be able to: 8.1 Explain the difference between the short run and the long run in macroeconomics (pages 272–277) 8.2 Understand what happens during a business cycle (pages 278–289) 8.3 Explain how economists think about business cycles (pages 290–293) 8A Derive the formula for the expenditure multiplier (page 301) FORD RIDES THE BUSINESS CYCLE ROLLERCOASTER The graph on the next page shows sales of Ford cars and trucks in the United States from the early 1960s through 2010. A firm’s sales can be affected by many factors, such as the prices it charges relative to its competitors, how innovative its products seem to consumers, and the effectiveness of its advertising campaigns. But for firms like Ford that sell consumer durables that buyers may have to borrow money to purchase, sales are heavily affected by the business cycle. The ups and downs in Ford’s sales shown in the graph mirror the business cycle. For instance, the two most severe business cycle recessions since World War II occurred during 1981–1982 and 2007–2009. During each period, Ford’s sales declined by more than 40%. Although rising gasoline prices also hurt Ford’s sales during these periods, the largest effect was from the business cycle. The causes and consequences of the business cycle were not always a significant part of the study of economics. Modern macroeconomics began during the 1930s, as economists and policymakers struggled to understand why the Great Depression was so severe. During just the first two years of the Great Depression, from 1929 to 1931, Continued on next page Key Issue and Question At the end of Chapter 1, we noted key issues and questions that serve as a framework for the book. Here are the key issue and question for this chapter: Issue: Economies around the world experience a business cycle. Question: Why does the business cycle .
