Discuss the importance of long-run economic growth; discuss the role of the financial system in facilitating long-run economic

growth; explain what happens during the entire business cycle

The importance Long Run Economic Growth is based on the following: The business cycle the alternating periods of economic expansion and economic recession, especially the duration and depth of either cycle. The increases in GDP due to productivity during an economic expansion and how much it contracts during a recession. o Labor Productivity is the quantity of goods and services produced by one worker for by one hour of work. o Capital available to workers which is used to produce other goods and services which includes human capital (knowledge) o Technological Change which increases productivity

The role of the financial system in facilitating long-run economic growth is the following:

The stability of Financial Markets and Financial intermediaries to provide Capital to markets. Funds are obtained from various places: o Households (as savings) o The sale of stocks and bonds via Financial markets o Capital invested by Banks via loans and investments o From savings via households or Government spending

The business cycle has distinct phases: The Expansion Phase where production, employment, and income are increasing. Expansion ends at peak of the business cycle. The Recession Phase where the decline of production, employment, and income all occur which ends with a business cycle trough. Inflation and employment usually decreases during Recessions. The beginning of another Expansion Phase usually with increases in inflation and decreases in unemployment