F105 Economics Building Cycles

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Business Cycle theory

Building cycles typically follow the wider economy with booms and slumps; there are suggestions that the property sector is  a significant driving force in explaining the broader cycles of the economy.

Theories that explain boom and bust.

Multiplier accelerator theory (combination of the two theories)

multiplier theory initial changes in planned spending (AD) Aggregate demand CAUSE larger eventual changes in NATIONAL INCOME

stimulates the economy note that changes become progressively smaller and that leaks occur (chain reaction of spending and income)

Combined with the

Accelerator theory (of Net Investment) the Causes of Investment…


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