Business Cycle and Monetarim tools in Economy

What is Business Cycle tools in Economy?

In Economics, a business cycle refers to a series of stages in an economy as it expands and contracts. Often referred to as a “trade cycle” or “economic cycle,” the process constantly repeats, measuring the rise and fall of Gross Domestic Product (GDP) over varying periods of time in a financial year.

Business cycles are universal across all countries that have a capitalistic economy. All such economies will face natural periods of growth and decline, though not all at the same time - so the periods in which they are measured can differ between nations.

Having an understanding of the different phases of a business cycle can help individuals, businesses and even governments make appropriate decisions around finance and policy to best support their economies.

What is Monetarism ?

Monetarism is a macroeconomic theory which argues that governments can maintain economic stability by targeting the growth rate of money supply. 

In simpler terms, it states that the total amount of money in an economy is the primary determinant of economic growth. As the availability of money increases, so too does demand for goods and services. This, in turn, increases job prospects, reducing the rate of unemployment, while simultaneously stimulating economic growth.

It’s a theory that is closely associated with the economic theorist, Milton Friedman, who argued that governments should keep money supplies steady, expanding them ever so slightly each year to allow for the natural growth of the economy.