Economic history shows that the economy never grows in a smooth and even pattern. A country may enjoy several years of exhilarating economic expansion and prosperity, as the United States did in the 1990s. This might be followed by a recession or even a financial crisis or, on rare occasions, a’ prolonged depression. Then national output falls, profits ‘and real incomes decline, and the unemployment rate jumps to uncomfortably high levels as legions of workers lose their jobs.
Eventually the bottom is reached. and recovery begins. The recovery may be slow or fast. It may be incomplete, or it may be,so strong as to lead to a new boom. Prosperity may mean i long. sustained period of brisk demand, plentiful job-. and rising living standards. Or it may be market! b) a quick. inflationary flaring up of prices and speculation. to be followed by another slump.Upward and downward movements in output . inflation, interest rates. and employment form.the business cycle, that characterizes all market economies.
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