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  Chapter Fourteen:

  Gross Domestic Product
  Business Cycles
  Business Revenues
  Trading Volume
  Dow Jones Average
  Crude Oil
  Energy Consumption
  Imports and Exports
  Foreign Investment



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Business Cycles

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The economy became more stable.
In the first half of the century, large, year-to-year fluctuations in the real GDP indicated severe swings in the business cycle between expansion and contraction of the economy. In the second half of the century, as the chart shows, these fluctuations became much more moderate, while the economy continued to expand. 

The moderation of the business cycle after midcentury has often been attributed to improved monetary policy and the effects of government programs. Better monetary policy prevented rapid, “unsustainable” expansion of the economy and also arrested contractions of the economy. Some government spending programs, such as unemployment insurance and farm subsidies, were deliberately designed to counterbalance economic swings. Federal insurance of bank deposits prevented economic contractions from causing liquidity crises. Government spending, which tends to be independent of the business cycle, represented a larger part of the economy in the second half of the century. Government transfer programs such as Social Security were also insulated from the business cycle.

Chapter 14 chart 2

Source Notes
Source Abbreviations

HS series F 3, and Brent R. Moulton, “Improved Estimates of the National Income and Products Accounts for 1929–99: Results of the Comprehensive Revision,” Survey of Current Business (April 2000), at the Bureau of Economic Analysis web site, (accessed April 2000). GDP change for 1999 from the same web site (accessed May 20, 2000). As on page 242, data from 1900 to 1928 are actually GNP figures.


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