Business Cycles: Causes and Control

Abstract

The purpose of this chapter is to examine the debate over the cause and control of business cycles. At the centre of the debate lie a number of fundamental questions, most notably:

• Is the economy inherently stable?

• What is the main source of shocks that affect the economy?

• How long does it take for the economy to self-equilibrate once subjected to a shock?

• Can the authorities intervene to reduce fluctuations in economic activity?