Term paper For economic's The Business Cycle Example | Topics and Well Written Essays - 2000 words

For economic's The Business Cycle - Term Paper Example Policy makers can determine business cycles by observing work productivity gains. This economic factor refers to output per given worker. Increasing work productivity gain has a negative relationship inflation rate. If work productivity per worker goes up there is reduction in production cost that ultimately results into lower prices of goods and services and decreased inflation rate. Despite the above economic leading indicators, investors have relied heavily on stock market to determine the trends in business cycle. It has been observed for so long that when there is decline in the stock market, the economy follows suit. However, less information is available on whether stock markets may result to better or worse performance of economy. This is an area that needs further research to establish the relationship between the stock market and business cycle or economy. There have been arguments that stock market has no direct effect on the economy as a whole. The stock market only acts as mirror that corrects beliefs of people about what may happen in the economy, but can not be said to be a certain indicator of economy.