Ceterus paribus aside...

Ceterus paribus aside...

by Owen Suvar -
Number of replies: 2

Ceterus paribus aside, i feel like there are a lot of ways the business cycle moves. For example, market sentiment can overbuy a market, a bubble forms and then pops. Another example is war, in times of war, people are less likely to fly commercially. A third example is natural disasters. They are bound to happen. In some places, and can drive the prices of some goods up and down, effecting the overall market.

In reply to Owen Suvar

Re: Ceterus paribus aside...

by Gavin Beer -
This is a great point. If business cycles are negatively affected by natural disasters or something, can the inflation aspect of the cycle moving be thrown off? Or would this just add insult to injury, leading to businesses closing shop?
In reply to Gavin Beer

Re: Ceterus paribus aside...

by Danny Weaver -
Owen is right in that increases in short run production can be lower or higher than the long run levels for various reasons. For the most part, the instances you mentioned can have highs and lows, but that volatility must be potent to really rock other sectors of the economy and throw the economy into recession. The curious question is why is the seemingly an overproduction in every sector across the US just before a downturn occurs? I would point towards inflation of the money by a central bank created by government deficit spending.