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Business Cycles, Full Employment, Inflation and the Fed

Why does capitalism have business cycles and what is our business cycle today?. Why would you suppose that the FED and the US Government to target these two percentages? What is the percentage rate of Full Employment and Inflation that that these two organizations try to keep as its target?

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Business Cycles, Full Employment, Inflation and the Fed
Remember - I cannot answer the question, but I can push you in the right direction.

Some intro materials: (I only cite people who are generally taken seriously)
http://www.slate.com/articles/news_and_politics/the_big_idea/2010/01/what_caused_the_economic_crisis.html
http://www.huppi.com/kangaroo/44More.htm
http://www.economicshelp.org/macroeconomics/economic-growth/cause-recession2.html
http://www.econlib.org/library/Enc/BusinessCycles.html
http://www.federalreserve.gov/pf/pdf/pf_2.pdf
http://college.holycross.edu/eej/Volume28/V28N2P255_268.pdf
http://people.stern.nyu.edu/nroubini/NAIRU.HTM

A business cycle is the "boom and bust" of all capitalist economies. The basic concept is that during a boom period, people save less, rates go down, borrowing gets more riskier and more people are hired, increasing demand. All of these things leads to a bust, because, eventually, the money for new investment will run out. If it keeps being created, it will eventually lead to inflation.
Inflation results when more money is being created without an corresponding increase in production. A perfect monetary policy would print as much money as would exactly match the amount of production in a society.

The Fed and the government target inflation and unemployment because they often work against each other. If they are balanced, then the monetary policy is a success. A rise in consumer ...

Solution Summary

References are given regarding the topics: Business Cycles, Full Employment, Inflation and the Fed.

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