During the period from 1970 to the present, the U.S. economy experienced a Great Inflation, a Great Moderation, and a Great Recession. How does this sequence illustrate the concept of a "business cycle"?
What will be an ideal response?
The sequence runs from bad economic conditions to much better conditions to bad again. The Great Moderation is, in part, the recovery from the preceding bad, and, perhaps, the result of deliberate responses intended to end and to prevent excessive inflation. An economy "strengthened" by its successful struggle against inflation is, perhaps, particularly vulnerable to the opposite problem of recession. And, perhaps, "moderation" inspires a complacency and/or excessive confidence that leads to recession. In any case, the Great Recession is, in part, confirmation that all good things (like all bad things) must come to an end.
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According to the text, the most serious cost of continued inflation in a democratic society is
A) its tendency to undermine social consensus and feed political conflict. B) the eventual recession that must inevitably occur as a result of the inflation. C) the open and disguised unemployment that accompanies it, especially among minorities and teenagers. D) the slowdown in the rate of economic growth that it causes. E) the steady rise in the cost of living that it entails.
"Supporters of import restrictions and protectionist policies place greater weight on producer welfare than on consumer welfare." Comment
What will be an ideal response?