AGGREGATE ECONOMIC ACTIVITY Fluctuations in the value of money are the inverse of fluctuations in the price level. Both are associated with cyclical changes in the general level of economic activity, which has a profound impact on man's wellbeing. Human welfare is also influenced deeply by the long-run growth in an economy. Reasonably accurate measurement of these short- and long-term changes in the total output of the economy has been achieved through the development of aggregative economic concepts. A pioneer in this advance of economic knowledge is Simon Kuznets, Professor of Economics at Johns Hopkins University, who warns us of important limitations in the use and interpretation of national income data.
Recurrent waves of economic expansion and contraction, identified as the business cycle, have upset modern industrial societies. The depression phase was long regarded as a temporary aberration, from which the economy would return itself to full employment without government intervention. In sharp contrast, the problem of depression was presented by John Maynard Keynes as requiring large-scale government intervention. His essential thesis, which has been a source of great controversy, is presented in an excerpt from the notable work The General Theory of Employment, Interest and Money. An assessment of the impact and survival value of Keynesian ideas is contained in William Fellner's article "What Is Surviving?" A classical description of the course of events in a hypothetical and representative business cycle is given by Wesley C. Mitchell in his Business Cycles and Unemployment. Alvin H. Hansen, outstanding American Neo-Keynesian and Littauer Professor of Political Economy at Harvard University, presents a more recent view of the business cycle in Business Cycles and National Income.
The idea of government action to maintain a high level of employment led in the United States to enactment of the Employment Act of 1946, which commits the Federal Government to the use of its powers for the purpose of preserving prosperity. A growing number of economists have come to feel in recent years that the net effect of this policy commitment is to impart an inflationary bias to the American economy. This very controversial issue is debated by Sumner H. Slichter, Lamont University Professor at Harvard, in his article "How Bad Is Inflation?," and by Neil H. Jacoby, former member of the Council of Economic Advisers, in his article "Thinking Ahead."