In order to assess short-run economic fluctuations, it is necessary to understand the theory of aggregate demand (AD) and aggregate supply (AS). This causes the unemployment rate to rise. For example, if producers reduce their production, they also lay off their workers and thus, reduce their spending (income). The third and most important characteristic is that when there is a decrease in the total output in the short run, there is a rise in unemployment rates. For example, if an economy is facing a contraction and slow down, people will reduce the amount of spending on houses, inventories, and their demands (macroeconomic variables). If the macroeconomic variables fluctuate together, they tend to have consequential impacts. The second characteristic is that in the short run, economic fluctuations are often influenced by how macroeconomic variables change. This is because business cycles follow a predictable path, from expansion to contraction. The first characteristic is that in the short run, economic fluctuations are always unidentifiable and largely indeterminable. Economic fluctuations possess three main characteristics. There are variables in an economy such as demand, supply, income, labor, production, etc., which contribute to potential economic fluctuations. Economic fluctuation in the short run is one of the by-products of these cycles. By its very nature, cycles are ever-changing and dynamic. Every country is influenced by business cycles.
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