Economic stability

A simple method of decomposition involves regressing real output on the variable "time", or on a polynomial in the time variable, and labeling the predicted levels of output as the trend and the residuals as the cyclical portion.

Milton Friedman believed that this was a key contributor to the Great Depression of the 1930s.

This can lead to unemployment, economic recession, or in extreme cases, a societal collapse.

However, they are generally opposed by monetarists and real business cycle theorists.

Monetarists believe that well-intentioned contercyclical monetary policy will generally be counterproductive, adding to the existing variability of real output, and real business cycle theorists believe that such policies are misguided because they do not address the underlying causes of fluctuations, which they believe lie on the supply side of the economy.