Chapter 22
Chapter 22 explained economic growth, business cycles, unemployment and inflation. There are two frameworks that analyze macroeconomic issues; long-run growth framework and short-run business-cycle framework. Inflation is the result of creating credit values in society without the actual production of wealth. Monopolies of Land and Land Speculation creates artificial scarcity of land which results in skyrocketing land values and are the last values to come down during depression. It makes it difficult for labor and small capitalist to go into productive and profitable activities. All over monopolies such as franchises, rights and other exclusive privileges have the same effect. It creates higher values which people must all pay without getting more wealth in return. The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables (Author Unknown, 2008). A business cycle is identified as a sequence of four phases: Contraction (A slowdown in the pace of economic activity), Trough (The lower turning point of a business cycle, where a contraction turns into an expansion), Expansion (A speedup in the pace of economic activity) and Peak (The upper turning of a business cycle) (Author Unknown, 2008). High unemployment means that costs rise less rapidly than prices when unemployment is high, so that inflation slows down. On the other hand, low enough unemployment will cause costs to rise faster than prices, with the result that inflation speeds up. In between the two extremes is a rate of unemployment just high enough that costs and prices rise at the same level, so there is no tendency for inflation either to speed up or slow down.
Chapter 24