The Great Depressions vs. The Current Recession

1. How did the Great Depression start?
The Great Depression began on October 29, 1929 in the United States due to the sudden crash of a stock market. Although it generated from this single country, it quickly spread around the world affecting many countries and their economies. Canada was especially affected since the United States was Canada's biggest trading partner. Once the United State's economy slowed down, so did Canada's. The Great Depression caused the governments to lay off jobs, and increase the cost of living by about 30 percent. The government did this by implementing all sorts of new taxes.

2. How did the current recession start?
The current recession started at the end of the year 2007. The Americans are at fault for this because they lent out too much money to people who were not liable to pay it back. This recession has had an enormous impact on our economy. There have been dramatic reductions in housing markets, an increase in the unemployment rate, as well as an increase in prices for manufactured products and oil.

3. How did the government take part following the event? Were/are they successful attempts?
The Canadian government took charge even though they were unprepared by creating various different social programs. As well, the government borrowed money from abroad while they could until the lenders began to lessen as the depression deepened. In my opinion, i think that the start of social programs for people in need is continueing to work. This was, and still is a very successful attempt. As well, the government also took part in the recessions by implementing new taxes which in my opinion has helped the citizens who are using all the social programs funded by the taxes. The government also layed off jobs and cut spending on health and education in order to help fund the social programs.

4. What factors are present now that were not present during the Great Depression?
Online banking and other online resources are two factors that are present in the current recession but were not present during the Great Depression. Now, people can keep track of how the economy is doing, and transfer money online. There are many online websites that provide information that can help people decide whether or not their money is safe in a bank and what they can do to help the economy. That was not possible during the Great Depression, so many people were "in the dark" meaning they were not able to be well aware of what was going on. This was negative because if people were not able to be well aware of the economy, they were not able to prepare themselves.

5. How did these two affect the United States' GDP?
Online banking and other online resources affected the United States and it's GDP by really bringing their economy down. The United States loaned a lot of money to people who were not liable to pay it back. The people who borrowed the money spent it recklessly, bringing themselves into debt and letting themselves think they can afford luxeries they really cannot. As soon as people started to realize they're bad spending habits, they panicked which caused them to start saving their money. This decreased the total consumer spending in the United States. Unemployment rates also went up. People lost their jobs, causing them to have less money to spend on luxury items. Instead of spending, they saved which brought the economy down. The decrease in spending and the decrease in income together have brought the United States' GDP and economy.

6. In your own words, tell me which one has made more of an impact on the world.
In my opinion, i think the Great Depression has made more of an impact on the world. The reason why i think this is because during the time period in which the Great Depression was present, people did not have access to any online resources. This led people to be very naive about what was going on in the economy, and so they were not prepared. As well, the Great Depression was one of the first depressions that a lot of economies went through. This economic depression prepared people for future recessions, so it had a big impact in that way.

Chapter 6-Aggregate Demand

   According to an article I read on Seeking Alpha, the earthquake and tsunamis that recently hit Japan are thought to bring great devastation to the country and its aggregate demand. The natural disasters have left Japan in need, with the citizens depending on the government to provide further fiscal and financial support. The article states that people will “debate about how they might do that given that you can only build so many highways and bridges” (paragraph 10). This article also reminds us of how rebuilding infrastructure is a no-brainer in this century, but with Japan’s aging population, government spending is going to have to lessen from personal health care in order to rebuild Japan. However, this might be difficult to do because of the high demand for health care.

   Aggregate demand is defined as the total demand for final goods and services in the economy at a given time and price level. Throughout this article, i discovered that Japan is experiencing a lot of negative things in term of its total aggregate demand. Distribution of income is a factor that is affecting and resulting from Japan's aggregate demand. The earthquake and tsunamis are going to rapidly affect all income earners; high, medium, and low. Therefore, people will be using their savings towards recovering, while people also lose their jobs. This is going to have a very negative impact on the aggregate demand and the total level of consumption in Japan is going to decrease. Disposable income is another factor of aggregate demand that is involved in the decrease of aggregate demand. People are going to spend a larger sum of their income on necessities and taxes, which will decrease all disposable income levels in Japan's economy.

   In my opinion, I think that Japan's government should step up and provide financial and fiscal support for all the citizens in need. What has happened is unfortunate and since people are losing so much, including jobs, the government is what they are all depending on. As well, i think that the government also needs aid in order to bring up its aggregate demand. All the other countries in the world should step up and lend a hand because we also depend on Japan for some of our imported goods.

Link: http://seekingalpha.com/article/258196-what-does-the-earthquake-mean-for-japan-s-fiscal-future