Question

Explain the mainstream theory of the business cycle. The mainstream business cycle theory is that​ ______ grows at a steady rate while​ ______ grows at a fluctuating rate.

A. potential​ GDP; aggregate demand
B. potential​ GDP; short-run aggregate supply
C. aggregate​ demand; potential GDP
D. ​short-run aggregate​ supply; potential GDP

In mainstream business cycle​ theory, the money wage rate is ▼ . If aggregate demand grows faster than potential​ GDP, ______ gap emerges and if it grows more slowly than potential​ GDP, ______ gap emerges.

A. neither an inflationary nor a​ recessionary; neither an inflationary nor a recessionary
B. a​ recessionary; an inflationary
C. neither an inflationary nor a​ recessionary; a recessionary
D. an​ inflationary; a recessionary

Answer 1

The correct answer are 1. potential​ GDP; aggregate demand; 2. an inflationary; a recessionary.

Step-by-step explanation:

The dominant theory of the business cycle is a theory about the business cycle, developed by economists at the Austrian School, including Friedrich Hayek and Ludwig von Mises. Explain the relationship between bank credit, economic growth and massive investment errors that accumulate in the bullish phase of the cycle, exploding with the bubble and destroying value.

On the other hand, the conventional theory of the economic cycle is a series of phases through which the economy passes and that happen in order until reaching the final phase in which the economic cycle begins again. It goes through periods of recession and periods of expansion. This phenomenon has been common throughout economic history, becoming known as "commercial cycles" or "cyclical fluctuations".