Question

Which of the following is a reason the government can’t completely control the business cycle

Answer 1

The basic reason is the government can’t control interest rates is the business cycle. Changes in interest rates should be reflected in the business cycle.

What is business cycle?

The term "business cycle" is used by economists to describe the increase and decrease in economic activity over time.

The interest rate cycle is closely related to the business, trade, and economic cycles. Theoretically, changes in interest rates should be reflected in the economic cycle. But the government can’t completely control interest rates.

Governments attempt to control business cycles through spending, tax increases or decreases, and interest rate changes. In order to stifle inflation and slow down the economy, the government will raise interest rates.

As a result, option (b) the government can't control interest rates is correct.

Learn more about on business cycle, here:

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