Business Cycle or Economic Fluctuations are terms for describing fluctuations in the economy. Essentially, they focus their attention on the fluctuations occurring in the production or economic activity over some period. The fluctuations entail swings occurring over time between phases of economic growth, also referred as booms, and phases of declination or relative stagnation also referred as recession. Notably, these fluctuations of economic activities do not occur in an arranged or predictable manner. To measure how the economy has faired, in terms of fluctuations and booms, the growth rate of real gross domestic product must be employed.
This paper explores the economic fluctuations experienced by the United States since the 1900s. In addition, it explicates the causes of the economic fluctuations at particular periods in the history of the United States.
The United States economy experienced fluctuations throughout its history, just like other countries' economies. Research asserts that, despite the United States income growing more than six-fold during the 80 years, many economic downturns have also hit its economy. In addition, compared to other countries' downturns in economy, the United States downturns are severe. The more severe downturn occurred in the period 1929 to 1933. Although considered mild, another downturn happened during the Ronald Reagan era. Most recently, the Bush administration also experienced a downturn.
The country had a decade of economic prosperity lasting between 1920 and 1929. Between these periods, the country experienced an all time high economy referred to as the roaring twenties. This economic prosperity attributed to the boom following world war one did not last beyond 1929 due to recession caused by the decline in the stock exchange market.
In 1930s, research asserts that the United States faced a period of economic fluctuation termed as the great depression. During this period, the United States Stock Market experienced a drastic decline. This decline referred to as the great stock market crash resulted to the declining of the United States economy at a first pace. Among other features, it led to the decline of the real gross national product at a rate of one third, and led to the rise of unemployed population to 25 percent of the labor force. Consequentially, there was an inordinate hardship experienced by many Americans.
Soon after this period, the United States economy experienced an era of prosperity that lasted between 1935 and 1945. This period of prosperity significantly attributed to increased spending by the United States government because of the impending war leading to the growth in real gross national product. According to estimations, it increased by about 75 percent.
The post-war period of 1950s saw growth in the United States economy. This growth resulted from the country emerging victorious from the Second World War. In addition, the country enjoyed growth because of destruction and the mayhem caused by global conflict. The reasons leading the country to experience this boom include the construction of factories supposed to produce war materials, and the transport industry. The factories provided employment for many, which in turn energized the economy.
Research indicates that the economic boom of the United States lasted close to two decades after which the country experienced an economic downturn again. This economic downturn occurred in 1970s blamed on a lagging economic growth and inflation. This led to bailouts of the country's economy by Lockheed and Chrysler that symbolized a difficult transition to another economic era. In addition, it led to ascendancy of small businesses, and growth in importance of the service sector. Another recession experienced during the Ronald Reagan era was so severe. However, it only lasted two years as the country immediately began experiencing robust recovery. This entailed creation of new jobs and bringing down of inflation rates resulting to the economic boom of the 1980s.
In 1990, the economy of the country plunged into recession. The main causes of this were rise in oil prices necessitated by Iraq's invasion of Kuwait, an increase in interest rates and the decline in the available credit. This led to increase in unemployment figures from 5.2 percent to 7.5 percent. Projections of economic growth began in 1995 as the country's stock exchange market earning increased necessitated by low employment and the increase corporate earnings.
The economic growth stopped in mid 2001 and the country experienced some recession caused by the long investment boom. The September 11 terrorists attack worsened the situation of the country. This made the country to be the cause of the world's economy downturn as many countries depend on the United States trends. In 2002 however, the economy of the country experienced some recovery attributed to business decision-makers capability to respond to economic imbalances. In 2003, the situation reversed again as the country engaged in military spending over the war in Iraq.
After the Iraq war, both the stock prices and consumer spending rebounded. In addition, inflation was low, housing market remained strong, additional tax cuts passed, and the dollar depreciated on world markets, a situation for favorable economic climate for the following years. Despite this, the country experienced another recession in 2009, essentially caused by banks debts.
In conclusion, the United States seems to have experienced more recessions than periods of boom. These recessions blamed solely on military spending and a fall in the stock exchange market result in high unemployment rates.