Economic Fluctuations

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Kadisha M. - Explain economic fluctuations and how shifts in either aggregate demand or aggregate supply can cause booms and recessions using the model of aggregate demand and aggregate supply.

Slide 5: Economic Fluctuations
 Economic fluctuations are changes in the level of national income
 Examples of economic fluctuations include;
 An increase in national income
 A decrease in national income
 An increase in national income represents a growing economy
 A decrease is a sign of a contracting economy
Notes: Economic fluctuations refer to the variations in the level of the national revenue. The variations in the level of national revenue can either increase or decrease. Therefore, examples of fluctuations in the economy are an increase or a decrease in …show more content…
It is believed that a shift such as to the left or right of the aggregate demand can cause economic fluctuations. To understand how economic booms and recession occur, it is imperative to look at the shifts in aggregate demand. When the aggregate demand shifts to the left the productivity levels are believed to fall in the short run and also causes a fall in prices. In turn, a decrease or fall in output levels and prices increases the rate of unemployment. The increasing unemployment rates tend to cause economic recessions.

Slide 7: How Shifts in Aggregate Supply Can Cause Booms and Recessions
 A shift in aggregate supply also causes economic changes
 A shift to the left leads a rise in price and fall in output levels
 A shift to the right causes an increase in output
 Increase in output results to economic boom or

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