The book's subject matter is Microeconomics. That is, the study of minute changes in prices at the micro level. Its name is derived from the term microeconomics, which, in economics, is a subdivision of macroeconomics. Thus, for example, in microeconomics we would study price changes in businesses or industries on a micro level.
In this course, you will study macroeconomic concepts and how they affect the economy as a whole. The emphasis in this chapter is the study of business cycles. The term “business cycle” refers to the general concept of recessions and recoveries, which are the normal business operating procedures during times of economic recession or depression.
As you likely know, recessions occur due to economic problems. The primary causes of recessions are changes in national income, changes in the supply of goods and services, changes in the demand for money, and other factors. Business cycles occur as a result of these changes. During a downturn, prices in businesses fall, but when growth resumes the cycle starts all over again.
For example, suppose that economic conditions in the United States begin to change in the early 1990s. Assume that inflation continues to rise. At this point, the Federal Reserve begins to raise interest rates, push down stock prices, and lower credit rates. As a result, businessmen everywhere experience a variety of symptoms, including difficulty gaining access to capital, difficulties maintaining cash flow, reduction in sales, and retrenchment from business activities.
As you can see, the causes of business cycles are very broad. This chapter focuses on the study of changes in price. It examines why the prices of certain goods and services increase during an economic downturn, but decrease during periods of economic expansion. This chapter will help you understand business cycles.
You should take notes on the macro models that you are presented with during class. The models are usually very simple, requiring only basic economic knowledge. If you are a student looking for more information regarding business cycles and the nature of macroeconomics, consider using the resources found at this website. It is a great way to learn about price changes and other indicators related to economics.
The final part of this chapter focuses on the micro level of business. This is the section that deals with studying the individual behavior of consumers. The purpose of this chapter is to examine how consumers behave when confronted with varying price structures. You will study how individuals interpret the signals created by macro models and how they make purchasing decisions.
Although the causes of business cycles are quite complex, you don't need to be a genius to understand them. If you want to take your studies to the next level, consider finding additional resources online. You can find more detailed explanations of macro models and micro level economic concepts. There is a wealth of information waiting for you. Take advantage of the resources available so you can become an expert in all aspects of the economic field.