Business cycles result from
A) changes in aggregate demand
B) changes in aggregate supply
C) changes in both aggregate demand and aggregate supply
D) greedy Wall Street executives
E) government intervention

Question

Quizplus · Accepted Answer

Business cycles result from changes in both aggregate demand and aggregate supply. Business cycles are fluctuations in economic activity that occur irregularly but with some regularity over time. These fluctuations in economic activity are driven by changes in both aggregate demand and aggregate supply. Factors that affect aggregate demand include changes in government spending, changes in consumer and business confidence, and changes in monetary policy. Factors that affect aggregate supply include changes in technology, changes in input prices, and changes in government policies. Thus, both aggregate demand and aggregate supply play a crucial role in shaping the ups and downs of the business cycle.

Business Cycles Result from