The Business Cycle & Policy Response in France Coursework

The Business Cycle & Policy Response in France - Coursework Example In 2000, France growth was close to 3%, its unemployment fell twice, and when compared to Europe it was a 1.5-percentage decline for France versus 0.7-percentage in Europe. The introduction of the single currency marked the period of strong growth. From this, we conclude that, in the last twenty years, it is evident that the periods of falling unemployment always coincided with periods of strong economic growths (French Ministry of youth affairs, 2007:4). A fall in a country's GDP relates to contraction in the economy, when the country does not show any improvement in the GDP it may result in an economy recession. Reasons may be due to inflation, or massive unemployment in the country, a rise in the GDP conforms to an expansion, stability of a country s currency, a peak relates to a continuous rise in the country’s GDP (Trading Economics.com, 2005:4). All forces of supply and demand affect business cycle. The availability of capital does boost a healthy expansion a rise in the price of assets at this point leads to inflation, the stock market then rectifies this by creating fear and contraction(About.com, 2001:1). A rise in GDP signals an expansion in the business cycle whereas a fall in the GDP signals a contraction. Reports show that the GDP of France expanded 1.6%in the second quarter of 2011. Historically France annual GDP growth was1.9% its highest observed in 1988 at 4.9%, a record low was -3.90% in march 2009. Judging the country's  state  at this point of the cycle, it will be  right  to  say  France’s economy is in  contraction.  We look at France in 2009, where its GDP shrank by 1.2% in the first quarter, however, this  was counteracted  by a 3% in the third quarter, another  fall  was recorded  1.5% in the final quarter.  The  recession  observed when we experienced two quarters of negative growth. In 2008 president, Nicholas Sarkozy gave a speech in Toulon he thought that there was the need to rethink the  entire  world’s financial system in  connection  to the economic crisis that the world faced. The president stated that what France was facing at that time was an economic recession and that it was a long-term problem. According to the latest  data  the French economy contracted, a 0.3% in the 2nd quarter in the year 2008, from the  previous  data economists concluded that the two quarters recorded negative growths. These data raised fears of a further recession in the economy.  This recession resulted in the rise in unemployment and a  struggle  in households to try to beat the recession (France 24, 2008:1). We  further  look at the  fiscal  policy and how it functions in stabilizing the  economic  fluctuation. How this is a  solution  to the recession problem?  According to Weil,  fiscal  policy involves utilising of government