If you stop and reflect a little, you would be surprised just how much the economy as influenced you and your life. Perhaps you began to make the connection after our discussion of economic growth and the standard of living. But it should become even clearer after this section on economic fluctuations, i.e. the business cycle. As the economy moves up and down it has a dramatic effect on the opportunities and threats we each face. Think about a major event in your life, where it involved someone (you or someone else) making a major decision that impacted your life and its path. It could be anything, positive or negative (some examples getting a job, losing a job, marriage, divorce, dealing with an illness, relocation, getting a scholarship, getting a promotion, changing schools, buying a car, buying a home, etc…). Then do the following…

1. Briefly describe the context surrounding the event and the relevant decision maker(s) (as much detail as you feel comfortable with) and identify the year of the event and then describe how the economy was performing at that time (refer to data links below).

2. Offer a brief explanation for the macro-economics performance using the dynamic AD/AS model. Was the economy experiencing a positive or negative real shock, or positive or negative aggregate demand shock? Use the tables from the book (13.1 and 13.2) to remind you of the factors that cause the different shocks.

3. Give a logical connection between the event (the decisions made) and the macroeconomic conditions. To do this it helps to think about what variables could change during the business cycle (unemployment, inflation/deflation, interest rates, personal income, tax revenue, consumer confidence, business confidence, certain types of spending, wealth, charitable giving, foreclosures, business openings/closings, stock prices, just to name a few). And then identify relevant decision makers and the incentives created by the changes in these variables.