Chapter 13.4, Problem 4R

To determine

To discuss: The reasons for expansion of economy during war times.

Explanation of Solution

During the times of war, it is seen that there is a rapid increase in the debt of public sector. The government borrows more than usual during the times of war. Also, spending on military generates more economic benefits and growth and also contributes to the technological developments.

With all these increased economic activities, expansion in economy can be seen at the times of war.

Economics Concept Introduction

Introduction:

Business cycle- The irregular changes in the level of total output that is measured by real GDP is the business cycle. The business cycle is considered important as it can have a significance influence on the consumer demand. The phases of expansion and contraction happen during the business cycle.When the economic activities begin to increase after trough, this period is called expansion. This period shows an increase in all the economic activities.