Economic activity is the sum of transactions for goods and services carried out in a given community through money. Economic activity can be affected due to economic cycles, a situation that leads to social conflicts of different natures. That’s why economics has often been seen bent on looking for solutions to alleviate the consequences of acute economic cycles.
Given these considerations, economic activity can register several stages: the first is the peak or growth of problems that anticipate a slowdown and the beginning of a recession phase. After this phase, where activity decreases in employment , investment and production , there is a depression , which comes at a time of activity stoppage with low demand for goods and services; and finally the recovery phase arrives, where the investment starts to move again and the different variables stabilize. Economic Activity
It is understood that this continuous oscillation between growth and recession has tried countless times to avoid or mitigate its consequences. Two top authors in economics who drew on the theme are Keynes and Hayek. Both distance themselves from the councils, especially with regard to the action measures that the State should have as an economic agent. Economic Activity
Keynes argues that cycles are a constitutive phenomenon of capitalism and that an economist would give little if there was no solution to curb this circumstance. That is why, during periods of decline in activity, it is recommended to increase public spending and state debt to promote aggregate demand; once the activity starts to recover, the recommendation is to gradually cancel the debts incurred. This is what is called countercyclical.
Hayek, on the other hand, prefers to let the market take its own course, as trying to control some sort of thing can result in more inconsistencies; a central authority to govern some type of planned economy cannot coordinate the needs of the market, leading to a worsening of the situation, although at first this remains veiled.
These two arguments only summarize the eternal dilemma that deals with these economic questions. Consistent in itself, the market should be involved or not, and if so, how far should it go. Dilemma that does not seem to be resolved in the short term. Economic Activity