Chapter 13, Problem 18AA

To determine

To evaluate: The ways in which the psychological factors affect the business cycle.

Explanation of Solution

Some incidents, including the Stock Market Crash of '29 & the Terrorist Attack of 9/11. It can either encourage people to buy more, sell more or save more. People are likely to buy more during such an adverse situation in order to store as shops are likely to stay closed. Sellers often strive to make profit by selling to consumers at a higher price by demonstrating the scarcity of providing products. They sell more to store in order to stay healthy in such situation because of the strong demand from the customer side.

Economics Concept Introduction

Introduction: The business cycle is the inevitable fall or rise in the level of output of the economy that happens over time. It is a valuable method to evaluate the economy and also helps to make financial choices easier.