. “The main, and in itself sufficient, cause of business cycle fluctuations ... is the fact...
. “The main, and in itself sufficient, cause of business cycle fluctuations ... is the fact that technical and commercial progress ... sometimes speeds up and sometimes slows down.” (Knut Wicksell) Do you agree?
Homework Answers
The given statement does gives some insights in order to understand the business cycles. If the technical progress slows down, the supply curve of the individual firms will get impacted affecting the overall supply curve of the industry. This will shift the aggregate supply curve in the economy in the backward direction. This will reduce the overall economic activity.
On the other hand, when the technical progress increases, the aggregate supply curve will shift in the forward direction and increase the economic activity. Technical progress also makes the prices competitive raising the level of consumption. This leads the economy towards a boom.
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