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Business Cycles
Economic growth is not a continuous process. Superimposed on the long-term trends are short-term fluctuations in the levels of economic activity and\or in growth rates. These upswings and downswings are of varying duration and intensity and are referred to as 'cycles'. Governments attempt to smooth out these fluctuations with the use of contra-cyclical monetary and fiscal policies. The latest developments in macroeconomic thought regard business cycles as the central (if not the only) problem of macroeconomics.
Many investors and financial analysts believe the Dow Jones Industrial Average (DJIA) provides a good barometer of the overall stock market. On January 31, 2006, 9 of the 30 stocks
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The following Table summarizes the profits of two firms as a function of their capacity investments levels (you can also interpret these levels as the quantities they produce):
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