Most of the nations of the world today have a free economy. A free economy is one which operates automatically. However, this automatic regulation of the economy is actually achieved by the price level. Price level can be defined as the weighted average of all the final goods and services produced in an economy. A healthy economy is characterized by a stable price level. Fluctuations in price level affect the economy's real domestic output (RDO), …
showed first 75 words of 2964 total

showed last 75 words of 2964 total
…cycles simply because no two business cycles are alike. Summarizing the trade cycle: *Depression - Unemployment : severe , Price level : at lowest point *Expansion - Unemployment: at lowest point, Price level(inflation): highest *Contraction - Unemployment : increasing, Price level(inflation): high *Recession - Unemployment: rapidly increasing, Price level (inflation): slows down. *Recession (severe) : Unemployment: severe , Price level: decreasing Thus the major issues facing an economy during any phase of a trade cycle remain inflation and unemployment.