How should we look at the past history of our global or national economy?

also i need some examples.

Expert Answers

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We should learn from the past. We should examine what it was that caused recessions in the past (and depressions) as well as what brought us out of them and what caused us to thrive when our economy was good.

When we look at this (which is what economists do all the time) we begin to see patterns. We see how, for example, supply and demand influences the market and the economy. We see how the value of the dollar compared to other countries' currency impacts our purchasing power at home. For instance, when the dollar becomes too valuable, it becomes to expensive to produce goods in this country. People stop buying American goods because they are more expensive than their foreign made counterparts. This leads to surplus supply, which leads American companies to cut workers and to outsource their production overseas. This contributes to a rise in the unemployment rate which in turn contributes to a lower purchasing power for American consumers due to loss of jobs. Also, unemployment rates rising means fewer people paying income tax since they are not making incomes. This means that the government gets less money, so the government ends up with a deficit.

It's all intertwined, but if we learn about the reasons that bring us into these situations we are better able to successfully adapt and to plan in such a way as to possibly avert the situation.

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