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Liz Prevas
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Japan and The Cycle

The country that I chose to research is Japan. I proceeded to click on "The Dismal Scientist's Global Economy". I found this very helpful; it contained an overview of Japan's economy. In short, the economy has been growing more rapidly than expected. This is mostly because public spending. Government increased 13.6% and public inventories increased 98%. Consumption also increased, but this had little effect on the over all economy. "While the increase in consumption is good news, it is still a weak component of GDP."

Then I proceeded to "Dr. Ed Yardeni's 'Economic Network" to get the graphs of GDP as well as the indicator graphs of Japan. I chose to examine the '91 - 92' and '97' cycle phase. These were the most significant times that seemed to jump out at me from looking at the graphs alone. I focused on those time periods for the rest of the graphs. During '91 -92', the real consumption expenditures dropped a total of 3.5%, reaching almost zero. The industrial production decreased 8%, bringing it into the negative range. The unemployment rate was at an an time low. It reached 2% from '90-'92. This is related to the dramatic decrease in production. In addition to these happenings, "the overall level of economic activity in a capitalist system, said Keynes (and Marx and Adam Smith would have agreed with him) is determined by the willingness of its entrepreneurs to make capital investments," according to the article Three Great Economists. I think this is relevant, because you don't see much consumer spending while the economy is in a recession. As soon as the consumers are not spending as much, the entire economy's productions cease which brings employment down as well. This cycle continues as the economy hits a recession period. Government spending was increased to create more money flow. Than it was decreased as the GDP came out of the recession. The real capital spending decreased 10%, bringing it into the negative range. Imports decreased 20%, in order to maintain the money and not spent on unneeded goods. The exports had a slight increase, and then decreased to 5%. Finally, the trade balance remained fairly constant. In other words, GDP= C + I + G + (X-M), all of this played a dramatic role in the GDP during the '91 -'92 recession.

The second cycle phase I chose to focus on was that of 1997. During this time period, the real GDP decreased an entire 8%, from 5.5% to -2.5%. The consumption expenditures reached an all time low. The year before it was up 3.5%, but it decreased into the negative area. It was found that the industrial production went down 16%. The industrial production was at an all time high of about 6% when in 1997 it when plummeting down to approximately -10%, bringing it to an all time low. Also, the unemployment rate was increasing extremely rapidly starting in 1997. It was up 3.4% and continued to increase through '99 until it was up over 4.6%. Government spending decreased 3%, then was brought back up as the economy came out of the recession. Capital spending decreased the most at about 24%, reaching the -10% by mid '98. While this was going on, the imports were decreased by 20% and the exports were increased. The trade balance was at a low of 6%. This recession would decrease production as well as consumer optimism. I think that consumer optimism plays a huge role in the economy. It seems like it is the base, or wheel, that makes the economy go round. In my opinion, if consumers aren't happy than the economy GDP, consumer expenditures,industrial production, and employment, or lack there of, contribute to the declining economy. We have the ability to work efficiently. In a sense I agree with the statement that the economy will work itself out without the help of the government. I think this, because we as the consumers have the ability to spend and save however we choose to. It all goes back to the point that the economy has a vicious cycle, if we get stuck in that cycle we will never get out of it. The consumers have the control. Yet, the government steps in, making it easier for the world of money to go round.

In conclusion, I have taken the time to look over these graphs that have no words, and I have created a story from these simple graphs. This story illustrates the economy of Japan through the more extreme decreases over the last century. The economy is here for businesses and consumers alike to learn and to profit from.

* Coach's italics, bold type, and underlining.

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