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S E34: The Boom and Bust of Business Cycles

Think Like An Economist

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Are Business Cycles Really Cycles?

Long run economic growth is determined by fundamental factors like how many workers and machines we have. Business cycles are like the ups and downs and other deviations from that long term trend. But they're not really cycles at all, there's no rule that says economy will rise or fall every five or seven or ten years. Recessions tend to be short and sharp; Expansions tend to be long and gradual. Since world war two, the average recession has laste only a year whereas expansions have lasted five years on average.

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