In this essay, I am going to explain what cyclical fluctuation is, the cause of it and what affect it do to the economy. I will also briefly mention about some of the macroeconomic policies and give personal opinion and advices about the policy which I think it works the best to manage cyclical fluctuation. With aid of diagrams, I will also justify the advice that I have discussed as well as to access the affects and outcomes to the economy as a whole. Finally, I will suggest what the government should be aware of and conclusion will be made.
Macroeconomics means the situation of the overall economy including information such as unemployment, inflation, production and price levels. According to the PwC (the PricewaterhouseCoopers International Limited),
“the UK economic growth remained somewhat above trend during the first half of 2007, but slowed progressively to a slightly below trend rate by the fourth quarter (see Figure 1.1). Year-on-year GDP growth has slipped below 3% and a further deceleration seems to have occurred in early 2008. Consumer spending growth generally held up well during the first nine months of 2007, but has weakened since then as the effect of modest real disposable income growth, tighter credit conditions, a weakening housing market and depressed confidence levels have fed through.”
http://www.pwc.co.uk/eng/publications/recent_UK_economic_developments.html
Cyclical fluctuation refers to the boom and bust cycle of the economy in UK. It is also known as the economy cycle or business cycle. Although there are no regular patterns of the fluctuation, but it normally repeats the cycle of recovery, boom, recession, sometimes even slump and depression. The diagram below shows that between the peak and trough, it is the co ...