The Great Deflation / Japan
-What were the effects on the real GDP in terms of C,I, G and X (GDP equation)? How did each of these 4 factors impact GDP? Do not forget to describe using terms such as aggragate demand and aggregate supply.
This story is about Japans changes in economy. At the beginning of this story, Japan was really good place for living. Even small-business owners were able to live luxuriously. They could afford themselves good cars, expensive homes abroad, vacations all over the world, rich weddings and good night-life. But at all of a sudden, everything changed. All of these things vanished. It was unexpected because Japan was the first Asian country which was competition to the West. This was poosible thanks to the great speculative stock and property bubbles. As they popped, Japans fortune changed dramatically. Japan slowly declined without enormous budget and a flood easy money reserved. After so “big and important” position in Global economy, this country faced deflation. Deflation was caused by nations state of being trapped in low growth and prices spirals going downward. This position of Japan made its economy like an example how economy should not look like. Other countries were afraid of the fact they may one day become in the position like this. After analyzing the economic situation of the United States, many economists remain confident that the US will not have destiny like Japan. They claimed that the US will avoid deflation thanks to the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction. Economists also said that Japans leaders at the very beginning of this problem denied deflation. They spent on other things instead of solving problems which are more important, like aggregate demand and deflation. Some people think that they were not interested in finding ways to make people spend and invest again (aggregate supply). This fact made global economy different. Now everybody was
This story is about Japans changes in economy. At the beginning of this story, Japan was really good place for living. Even small-business owners were able to live luxuriously. They could afford themselves good cars, expensive homes abroad, vacations all over the world, rich weddings and good night-life. But at all of a sudden, everything changed. All of these things vanished. It was unexpected because Japan was the first Asian country which was competition to the West. This was poosible thanks to the great speculative stock and property bubbles. As they popped, Japans fortune changed dramatically. Japan slowly declined without enormous budget and a flood easy money reserved. After so “big and important” position in Global economy, this country faced deflation. Deflation was caused by nations state of being trapped in low growth and prices spirals going downward. This position of Japan made its economy like an example how economy should not look like. Other countries were afraid of the fact they may one day become in the position like this. After analyzing the economic situation of the United States, many economists remain confident that the US will not have destiny like Japan. They claimed that the US will avoid deflation thanks to the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction. Economists also said that Japans leaders at the very beginning of this problem denied deflation. They spent on other things instead of solving problems which are more important, like aggregate demand and deflation. Some people think that they were not interested in finding ways to make people spend and invest again (aggregate supply). This fact made global economy different. Now everybody was