The rise and Fall of American Economics Term Paper

The rise and Fall of American Economics - Term Paper Example Considering that macroeconomics characteristically focuses on a nation’s economic performance including the manner in which the nation’s economy interacts with other economies globally, it is worth noting that the economy of the United States is not only the largest but also the most complex in the world history, with 87,600 separate government jurisdictions, approximately a hundred and fifteen million households, and thirty million profit organizations/businesses. The U.S. economy is therefore comprised of millions of decision makers who though acting with some autonomy, are all linked with the entire economy. The economy is dynamic – keeps continually renewing itself with new businesses, customers, foreign competitors, households and public official groups among others. Currency circulates throughout the U.S. economy, which facilitates the exchange of products as well as resources among the individual economic units – it is constantly in a circular flow (McEachern, 2008). Historically, just like other industrial market economies, the economy of the United States has gone through sporadic contraction and expansion periods. The rise and fall of the economy refer to the economic fluctuations relative to the economy’s long term growth tendency.... The rise and fall of the economy refer to the economic fluctuations relative to the economy’s long term growth tendency. These variations/business cycles vary in intensity and length, although some elements are universal to all. Usually, the fluctuations involve the whole nation and frequently several other world economies. Additionally, the fluctuations affect almost every economic activity dimension – not just employment and production (Hirschey, 2009). McEachern (2008) notes that the simplest way of comprehending the business cycle is by exploring its elements. He explains that in the 1920s and 1930s, the national Bureau of Economic research director carried out an analysis of business cycles and identified two phases of the economy namely â€Å"contractions† and â€Å"expansions.† He elucidated that the output of the economy declines during a contraction while it increases during an expansion. Prior to WWII, a contraction occurred – this was as severe as to be termed a depression. A depression is a sharp decline in the entire production of the nation going for over a year and accompanied by high rates of unemployment. When a contraction is milder, it is reffered to as a recession – characterized by a reduction in overall output over a period of at least six months or two consecutive quarters. Unlike prior to the world war II when the United States experienced both depressions and recessions, in the period after and until the year 2008, there have not been depressions; only recessions, which is an indication of an improved economy. The quarter-century after World War II appears more like a golden age for the economy of