Examine the fundamental causes of a nation’s business cycle fluctuations. Also, examine the relationship between total spending by government and consumers in a nation and the location of the countries’ GDP on the business cycle.

1) Fundamental causes of a nation's business cycle fluctuations:  The causes of business cycle fluctuations are economic growth and recession.  The economy of a nation fluctuates within its business cycle by witnessing periods of expansion and periods of contraction, including those in-between.  The fluctuations or changes are caused by forces of supply and demand, the movement of the gross domestic product or GDP, the availability of capital, and expectations about the future.

The business cycle is divided into four distinct segments: expansion, peak (or crisis point), contraction (recession), and trough (recovery period).   But, the vital factors driving expansion and recession can be located in the economy's levels of production, prices, interest rates, income, and employment being experienced at any particular period.

2) A relationship can, therefore, be discerned between total spending by government and consumers and the location of the countries GDP on the business cycle.  Total spending by government and consumers drives the gross domestic product and the supply and demand for goods and services.  They are in turn driven by the availability of capital for spending and expectations about the future.  When the government and consumers have more resources to spend as a result of low-interest rates, rising income, and availability of capital, the resulting productivity increases total GDP.  Increasing GDP ensures economic expansion.  Economic outlook affects spending.  Expectations of a brighter future trigger economic buoyance, more spending, and increased GDP.  On the other hand, lower GDP is caused by worrying economic outlook where spending is withheld because of envisaged future uncertainties.

This is why some economists believe that Governments and the general public can always spend their ways out of a recession.  The implication is this, in order to end a recession, governments and individuals are advised to boost their spending in value-adding activities.

Explanation:

a) The Business cycle of a nation:  The business cycle is also known as the economic cycle or trade cycle.  It describes the downward and upward movement of gross domestic product (GDP) between periods of economic growth and recession.

b) Gross Domestic Product (GDP) is the value of finished goods and services made within a country during a specific period.  GDP shows a country's economic activities in total.  The measure is used to estimate the size of an economy and its growth rate.   There are three ways to calculate GDP, using expenditures, production, or incomes.

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