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Business Fluctuations in Real GDP using Aggregate Demand and Supply Model

Business fluctuations represent deviations in real Gross Domestic Product (GDP) from its long-term growth trend within macroeconomic theory. These phenomena encompass recessions defined by significant declines in aggregate income, employment levels, and the utilization of land and capital resources. The theoretical framework posits that such fluctuations indicate an economy operating below potential output due to the underutilization of factor inputs, creating inefficiencies through wasted resources.