How U.S. Government and regulatory bodies can manage business cycles Essay

How U.S. Government and regulatory bodies can manage commerce wheel arounds - Essay ExampleBusiness wheels can be defined as larger fluctuations in the economic activities or in the production of goods and ser iniquitys over a abundant period of time. It is sometimes known as economic cycle and is often associated with periods of high economic growth. The business cycle therefore consists of periods of economic booms as well as periods of economic recession or decline. The cadence for the business cycle is often done by the government through the measure of the Gross home(prenominal) Product (GDP) of a particular nation. It is however important to cable that even though it is termed as a business cycle it does not follow ant pattern or any mechanically predictable pattern (Lynch, 85). In this context, it is therefore difficult to tell what pattern or direction the future cycle will take. This presents a challenge to the managements of the business cycles and call for better wa ys of forecasting. The explanation of the causes of the business cycles the Great Compromiser some of the controversial issues in the analysis of economic growth in many economies (Hill, 320). One of the more or less common known causes of business cycles is the disequilibrium commonly known as the Keynesian theory. This theory is based on the aim that the fluctuation in the economy often begin because of lack of film for the workers or labor. The argument here is that labor market or demand for labor do not adjust at once but take very wide time and hence it is difficult for the government to adjust suitably and at the right time (Agnew, 197). The lack of demand for workers often adjust after very long period of time and the result of this is that it takes time. Moreover, the stipend for labor and the prices argon sticky as some are not easily adjustable and hence it takes very long time for the labor market to serve to the demand. If output signal goes down it is due to that market fails to clear pushing the economy into recession (Brentani, 109). This explains the downwards and the upward(a) trends in the economy that forms the business cycles witnessed not only in the United States of America but too in the other nations across the world. The real business cycle theory on the other evanesce asserts that the changes or the fluctuations in business occur as a result of real factors. It is important to note that this theory believes that the government should not take part in controlling the market forces. The market forces of demand and supply should be left to adjust on their own (Treve, 72). The intervention of the government through the financial as well as fiscal policies is not necessary, because the economy is capable of adjusting to the changes on its own. This theory alike puts more emphasis on the substitution of labor and technological shocks as the major causes of business cycles. stroke of the economy to adjust to these changes wou ld therefore lead to economy moving to recession. With regard to this theory, the rates of changes or the peak to which workers responds to incentives determines the supply of labor. Fluctuations in the level of technology also have serious reachs on the labor productivity because it affects the incentives (Knoop, 251). The high rise in technology would improve the productivity of labor and hence the real wages would rise as well. This would then result into the increase in the output and rates of employment and vice versa. This theory has also considered other factors like terrorism, disasters, political unrests, weather conditions among other factors that can affect output of an economy. In this way of argument, money does not impact on output neither does output impact on money and hence both move together in the same direction (Knoop, 253). significant business cycle theory is thus very important in the understanding of business cycle theory. However, just like any other the ory, it is not perfect and has its own limitations. The