What 2 things detirmine booms and recessions in our economy?
Public spending and the federal monetary policy are key activities that determine booms and busts in the economy. Check this site for more details.
http://www.econlib.org/library/Enc/BusinessCycles.html
Boom and recession cycles in the economy are influenced by various factors, but two key factors are public spending and the federal monetary policy.
1. Public spending: When the government increases its spending on infrastructure projects, public welfare, and other initiatives, it stimulates economic growth. This increased government expenditure creates demand in the market, leading to increased production, job creation, and overall economic expansion. A boom period generally occurs when public spending is high, as it boosts economic activity.
2. Federal monetary policy: The federal monetary policy, implemented by the central bank (such as the Federal Reserve in the United States), plays a significant role in influencing the cycle of booms and recessions. The central bank has the authority to control interest rates, regulate the money supply, and establish credit conditions. By raising or lowering interest rates, the central bank can influence borrowing costs, investment decisions, and consumer spending. When interest rates are low, borrowing becomes cheaper, encouraging businesses and individuals to invest and spend. This leads to a period of economic expansion and a potential boom. Conversely, higher interest rates can slow down borrowing and spending, potentially leading to a recession or economic downturn.
Other factors, such as consumer spending, international trade, technological advancements, and geopolitical events, also influence the economy. It is important to consider a combination of these factors when analyzing the causes of booms and recessions as they are interconnected and interdependent.
For more in-depth information regarding business cycles and the factors influencing them, you can visit the provided link to the Economic Library (http://www.econlib.org/library/Enc/BusinessCycles.html), which offers comprehensive resources on the topic.