Qn. how business cycle can be controlled?

 
Ans- 1. Monetary Policy- Monetary inflation, Monetary deflation 
2. Fiscal Policy 
3. Automatic Stabilisers 
4. Another Built-In-Stabiliser in the U.S.A is Unemployment Insurance 
 5. Direct Controls 
Qn. what determined the overall level of output and employment? 
Ans-In the classical model, equilibrium level of output is determined by the employment of labour.
The level of output and, hence, the level of employment is established in the labour market by the
demand for and supply of labour. where W is the money wage, P is the absolute price level, and W/P
is the real wage. 
Qn. how inflation is controlled? 
1. Monetary policy – Higher interest rates reduce demand in the economy, leading to
lower economic growth and lower inflation. 
2. Control of money supply – Monetarists argue there is a close link between the
money supply and inflation, therefore controlling money supply can control inflation. 
3. Supply-side policies – policies to increase the competitiveness and efficiency of the
economy, putting downward pressure on long-term costs. 
4. Fiscal policy – a higher rate of income tax could reduce spending, demand and
inflationary pressures. 
5. Wage/price controls – trying to control wages and prices could, in theory, help to
reduce inflationary pressures. However, they are rarely used because they are not
usually effective. 
Qn. what makes an economic grow overtime? 
Ans- The four main factors of economic growth are land, labor, capital, and entrepreneurship. 
Economic growth results when groups of people, so-called economic actors, are able to produce
goods and services with increasing efficiency. To produce real productivity, an economy must have
better tools and equipment, namely capital goods, and greater specialization of laborers.