This chapter discusses short-term contractions of the economy, or business cycles. It explains waves in business cycles, which are not regular, and explores their causes, or what are called the “booms and busts” in a macroeconomy. Professor Sachs shows a de-trended series of the US economy and discusses how business cycles are fluctuations on top of long-term growth. He tells the story of the 2008 recession and financial collapse and asks what causes business cycles, whether business cycles can be stabilized, and what the differences are in the relationship between the short-run and the medium-term.

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