Expansion. Contraction. Repeat.
For almost 200 years, we’ve recognized this boom-and-bust pattern as the business cycle, the downward and upward movement of gross domestic product (GDP) around its long-term growth trend. But while we all know what it is, we don’t always agree on what causes the business cycle.
In the following series of four videos, economist Tyler Cowen briefly explains four different theories — Austrian Theory, Keynesian Theory, Monetarist Theory, and Real Business Cycle Theory — and highlights some of the insights and flaws with each.
Real Business Cycle Theory