ECON 223 Study Guide - Final Guide: Real Business-Cycle Theory, Credit Cycle, Finn E. Kydland
29 Oct 2015
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Bank hence, the great moderation : this complacency regarding business cycles came to an end with the financial. Incoming governments want to appear strong and financially prudent, and thus spend less and tighten the money supply to get ride of inflation. This has depressing effects on the economy: at the end of the term, governments who seek re-election stimulate the economy with spending. The partisan business cycle theory: the electorate alternates between favoring an economically liberal regime and an economically conservative regime, that is, when liberal spending gets out of hand, conservatives get elected. When unemployment gets out of had, liberals get elected. Mish-mash: using various statistical techniques to try and predict booms and busts. Explaining business cycles: real business cycle theory: after the high inflation of the 1970s, economists wanted to take consumer and firm expectations into explicit account when modeling the macroeconomy.
