The Laguna Beach Economist

The Laguna Beach Economist

THE LAGUNA BEACH ECONOMIST The Basics Issue

1. Letter from the Editor 2. Poverty When having a job still doesn’t pay the bills

6. Economic Growth

There might be one down-side to a powerhouse economy- but that doesn’t mean the alternative is better.

10.Unemployment

A simple problem with complex reasons and controversial suggested answers

14.Inflation

Someday we’ll yearn for the days when gas was only four dollars per gallon

18.GDP and the Business Cycle

The recession affects all of us, but is it really a cause for concern?

In this edition of “The Laguna Beach Economist,” we’re going back to basics- discussing the things you’re too embarrassed to ask someone who knows their stuff. We spent a lot of time evaluating the economic knowledge of the general public, and determined five areas of interest that most Americans understand the leas- but often think they know best. We made it our goal to lay out the bare bones of complicated issues to help you, the reader, come to your own conclusions about the politics of each sensitive issue. Because of the controversial nature of some of these issues, we remained determined to present an unbiased, factual perspective on the basics of the issue, without injecting our own personal perspective into the information.

One woefully misunderstood concept of economics is unemployment. So frequently we hear that the unemployed should just “get a job” or “stop being so lazy.” Both of these indications are unfounded when the facts are examined. Furthermore, oftentimes people feel we must support the unemployed and offer great security for investors and entrepreneurs. However, we will examine the idea that this level of government regulation may not be as beneficial as one would think.

In addition to unemployment, poverty is widely misunderstood. While any poverty is a travesty, it is comforting to know that the United States is relatively well-off in terms of poverty rates. However, any American impoverished is one too many; therefore, we will examine the proposed solutions for poverty in the United States as well as abroad.

One of the most complicated economic issues faced in modern society is inflation, yet we see its effects every day. While many yearn for the days of one-dollar gallons of gas and penny arcades on every street corner, inflation may not always have the negative effects it seems. Later, we will examine the effects of inflation, its causes and effects, and how inflation can balloon completely out of control.

When the recession hit a few years ago, it hit hard. However, many people don’t realize that recessions are a natural phase of the business cycle, and one that is necessary for recovery and growth to occur. While U.S. citizens may feel disadvantaged by the recession, our GDP still remains in the top ten globally; all is not exactly as it seems.

Seeking to be a power-house economy seems natural to most; however, reaching a higher point often means growing closer to the ceiling. While a strong economy is essential to general well-being and a high standard of living, it is important that we leave room to improve. With so many issues plaguing our economy-far more than we examine in this issue- it seems impossible for balance to occur. These constant shifts and imbalances are exactly why economics are so vitally important to our continued success of a country: in order to figure out how to get what we need, we must first figure out who gets what and why.

-Editor, Alexx Murphy

A

s of 2008, 39.1 million United States citizens 1 lived in poverty . US standards indicate families of four living on 23,050 dollars a year or less are considered impoverished.

Poverty in the US has almost reached the same levels of the 1960s, during the War on Poverty.

The government uses a measurement called the “poverty threshold” to measure the lack of goods that are widely considered necessary for life. Poverty is based on total income received. The Department of Health and Human Services determines how high or low the poverty level will be for the next year through the census and poverty thresholds. President Lyndon B. Johnson said that the “absolute poverty line” is “lacking the resources to meet the basic needs for healthy living.” Considering this fact, it is not hard to imagine that for most families, minimum wage is more often than not, insufficient to keep a family from being impoverished.

Wealth Distribution in the United States 4.0%

0.2%

0.1%

11.1%

Wealthiest

Upper Class

Middle America

84.6%

Working Poor Impoverished

Geographical location and demographics play a large role in poverty rates. Rural areas tend to have less poverty because food and necessities are far less expensive in rural areas than in their more urban counterparts. However, many people believe living in urban areas is more beneficial because urban jobs tend to pay better than rural jobs. Poverty also differs from state to state due to differences in regulation and taxation among the states. For example, taxes in California are higher overall than taxes in Montana, which makes living in California more expensive and being impoverished more common. Demographics also affect poverty rates. For example a household led by a single parent is far more likely to be in poverty than a family with two parents; the percentage of married couples in poverty in 2007 was 5.8% whereas the percentage of single parents was 26.6%. Of those single parent households in poverty, over 75% were run by women1. Surveys were unanimous in indicating that people in poverty are more likely African-American or Hispanic than another race. Some argue that these particular groups remain in poverty because they are often not offered equal rights to employment and wages in the jobs they do hold when compared to other racial groups. While many other causes have been suggested, the fact that Hispanic and AfricanAmerican people are more impoverished than other races cannot be refuted.

Poverty greatly affects education and lifestyle; overall wealthy places are able to do 1

U.S. Census Bureau. Current Population Survey. People in Families by Family Structure, Age, and Sex, Iterated by Income-to-Poverty Ratio and Race: 2007: Below 100% of Poverty – All Races.

far more than places with higher poverty rates. For example, Laguna Beach is widely viewed as a more pleasant community compared to Riverside; the general populace is wealthier and the tourism industry is stronger. Because of that Laguna Beach’s schools are able to provide far more for their students, such as dual sets of textbooks for each student. Such luxuries also encourage a low crime rate in Laguna. Places with higher poverty rates tend to have higher crime rates as well. For example, Los Angeles County has a relatively high crime rate as a whole.

However, Bell Air, a wealthy area, has a low crime rate compared to the county, while Compton, an area with a high poverty rate, has one of the highest rates of violent crime in the country. Overall, the effects of poverty extend far outside of those who live in it. The government tries to fight poverty with welfare programs which, according to some, needlessly raise taxes but, according to others, ultimately do a fair job of combatting poverty.

As of 2010, the United States has a poverty level of 15.1% according to Index Munid. While this number may appear high, the US is relatively well-off in terms of poverty. One of the most poverty stricken nations the world, the Democratic Republic of Congo- sometimes referred to as D.R. Congo- is the second-largest and fourth most populous country in Africa. With a population of over 75 million, the D.R. Congo is the nineteenth most populous nation in the world. D.R. Congo is also must impoverished country in the world: 75% of the population lives below the poverty line. There are a number of complex reasons, including conflicts over basic resources such as water, access and control over rich minerals and other resources as well as various political agendas that contribute to such an extreme level of poverty. Less than half of the residents of D.R. Congo have access to

drinking water or basic health care. Three out of every ten children are poorly nourished and the average life expectancy of a young child is five years old.

Many individuals, organizations, and governments seek to aid this impoverished nation, but many different reforms must be achieved. First of all, the people of D.R. Congo need clean water. Many private organizations seek to aide in this cause by improving irrigation systems, digging wells, and offering water purification technology. Experts believe that clean water is the first step in lowering the rate of poverty and malnutrition by lowering diseases contracted from unclean water; allowing more people to work rather than embark on daily miles-long journeys to find water; and increasing the crop yields of local farms. Second, the D.R. Congo has the highest rate of women’s sexual assault in the entire world, thus forcing many unwed, unsupported women to care for children they cannot feed or care for.

Celebrities such as Angelina Jolie have led international campaigns to try and combat the rapid overpopulation through adoption of needy children into households that can care for them. Additionally, many organizations seek to spread contraception to the men and women of D.R. Congo and other third world countries, simultaneously preventing unplanned pregnancies and reducing the spread of HIV. The third aspect that many seek to improve is education. Supporters claim that systems must be put in place to bring up a generation than can learn some set of skills or trade applicable to one of the career paths available to them, and encourage the growth of a nation deeply in need.

Economic Growth

at Home and Abroad

conomic growth occurs constantly across the globe.

In the United States, growth occurs in several industries and areas, and declines in several others. Things such as the Gini Coefficient and Lorenz Curve help depict economic growth. The Gini Coefficient measures the inequality among the values of a frequency distribution using a single number. In a similar vein, the Lorenz curve is a graph upon which the cumulative percentage of total national income is plotted against the cumulative percentage of the corresponding population. The curve of the line represents the inequality of distribution. Economists often use the Lorenz curve to figure out how income is distributed among the population.

Lorenz curves are also used for other single entities or even groups, such as families, individuals, and corporations.

Economic growth is important for many reasons. Economic growth helps a country stay ahead of competition by having a higher quality of goods than its competitors. Economic growth helps secure a promising future for the country. Economic growth can also aid in solving many problems in the economy. Most importantly, economic growth moves society forward because

when the economy thrives, industries develop breakthroughs, allowing society to thrive as well.

The chart accompanying this article compares the GDPs of Mexico and the United States. While the differences may appear minute, the graph shows huge differences in the economy of both countries and disparities in their growth. The United States and Mexico appear similar on a percent change GDP graph, but the first distinction is Mexico’s more drastic changes. The United States, while undergoing some instability in its GDP, endures mostly gradual changes.

Mexico’s changes are drastic by comparison. Mexico’s simple economy has little opportunity for growth, with Mexico’s relatively small population and limited resources. Thus, Mexico’s GDP changes quickly. Conversely, the United States has a stronger, more reliable economy. The changes occur more slowly and are less chaotic. This comes from the United States’ overall stronger economy. However, although the United States economy is stronger, Mexico has more potential for economic growth.

Through the comparisons of these two countries, one can see United States’ economic strength over Mexico’s, but Mexico’s greater opportunity for economic growth and improvement.

Many believe that changes in poverty levels and income distribution measure economic growth.

Poverty represents the population in a country who are employed but cannot fully support their families on their

earnings. Poverty depends on incomes, prices, and standard of living. Standard of living is based upon wealth, comfort, material goods and necessities achievable by a socioeconomic class in a country or area. Standard of living often parallels quality of life. The “quality of life” in a country is measured by one of two dollar amounts: Gross Domestic Product (GDP) or Median Household Income. Americans are lucky to have one of the most sought after standard of livings in the world at $42,000 GDP per capita and $43,000 Median Household Income. Even though the United States has an impressive GDP, by no means does it have an equally impressive economic growth rate. Economic growth takes place when the GDP increases and is measured by a GDP growth rate.

Countries with a low GDP, like Mexico at a GDP of $15,000, have more potential for economic growth because they have more room to grow toward already successful economies like that of the United States.

The economic status of a country all relies on the standard of living and poverty. A citizen’s income can define their personal economic status, and collectively all incomes of a country define the country’s GDP. If a citizen’s income falls below a certain level, it falls below the poverty threshold. People below this threshold are granted access to certain government supplements, such as food stamps or other welfare programs. The poverty guidelines define for which government supplements a family or individual is eligible. The GDP inequalities of the world can depend on a number of factors. The first of these factors is education. It is obvious that the United States has a legitimate education system, and this is reflected in the powerful GDP

of the U.S. Education leads to highly skilled workers who earn high wages for their specialized services. The United States takes great pride in its education system with a 99% literacy rate. A country with a lower GDP can expect a lower literacy rate. For example, Mexico remains at an 86.1% literacy rate.

Another factor for GDP is the current wealth held by a country. A highpowered nation like the United States has a large amount of money to invest into job and welfare programs, which often improve the GDP of the entire country. Because Mexico would have a tougher time finding the money for these programs and it would prove difficult for Mexico to improve their GDP without spending money, Mexico’s GDP will likely not grow rapidly in the near future without significant change in circumstance..

To make the economic growth synopsis complete, the negative effects of economic growth must be considered.

Many believe that after a certain point, the GDP becomes excessive and it is impossible to improve the standard of living past a specific point; the high GDP would be obstructive to sustainable living. Another negative point of view includes ideas such as the rich getting richer and causing economic growth and the poor staying in their current economic state. This would lead to little progress in improving poverty even though the GDP would still be increasing.

While the continued suffering of the impoverished is less likely in developed nations with welfare programs, like the U.S., Mexico faces great problems with the wellbeing of their poor.

The

of Jobs across

the Globe

nemployment is often caused by circumstances outside an individual’s control and is therefore very difficult to remedy. In order to understand the severity of joblessness in the United States, the US Census Bureau takes monthly surveys that measure the rate of unemployment. There are several different kinds of unemployment: frictional, structural, technological, cyclical, and full unemployment. First, frictional unemployment involves workers who are merely changing jobs or waiting for new ones; contrarily, a more severe variety of unemployment, structural unemployment, is caused by a fundamental change in the economy that reduces the demand for certain types of workers. Similarly, technological unemployment is caused by technological developments or automation that makes some workers’ skills obsolete. Cyclical unemployment occurs in accordance with the regular changes in the business cycle. Finally, full employment, wherein all available labor resources are being used in the most economically efficient way, is the ideal goal of a well-functioning economy.

Full employment utilizes the greatest amount of skilled and unskilled labor that can be employed within an economy at any given time. While countries strive for full employment, this ideal situation is never realized, resulting in varying degrees of unemployment.

Unemployment causes widespread uncertainty, political instability, and even social problems.

The current unemployment rate in the United States of America is at 7.9%. One major cause of American unemployment is the recession, which began mainly around 2008 when major banks failed, leading the US economy into the worst recession since the Great Depression of the 1930’s. Many factors, including unemployment, result from the economic recession. Many economists

attribute this economic decline to the continuation of heavy spending in defense, especially in the Middle East.

Several different political views suggest many ideas that may improve our overall economic situation and, therefore, unemployment rates. However, two main groups oppose each others’ ideas, but work toward the same goal of reducing unemployment.

Conservative supporters generally argue for free market solutions with less government restriction of the private sector.

Generally, conservatives propose the deregulation of cutting taxes on businesses and people.

Additionally, conservatives oppose stimulus spending or bailouts, meaning they are against spending with the goal of stimulating the economy when the government is already in a deficit. Advocates of conservative views favor supply-side economics, or lowering barriers faced by those who produce goods and services, such as and income tax and capital gain tax.

Conservatives ultimately want the government to be less involved in economic policies and decisions.

On the other hand, liberals tend to argue for government action on the private sector to improve job creation. A liberal approach to unemployment usually involves stimulus spending on infrastructure construction, clean energy investment, unemployment compensation, loan assistance, and retraining programs. During recessions, liberals argue for additional government spending if the private sector is unable to support economic growth. Liberals are also usually less concerned with budget deficits and debt and have higher tolerance for inflation to improve trade competition as weaker currency devalues US exports.

According to the World Fact Book, Thailand has the world’s third lowest

unemployment rate at the Unemployment Rates from 2008 to 2012 extremely low .7% as of 2012. Thailand is ranked 14% tenth out of the forty-one 12% Asian-Pacific countries 10% based on their economies.

Some proposed reasons 8% for Thailand’s economic 6% success involve its 4% freedom from government regulation; 2% Thailand is ranked the 0% sixty-first overall freest 2008 2009 2010 2011 2012 economic country. Those who share conservative U.S. Thailand Greece views support this conjecture, and support their ideas by drawing attention to similarly spending cuts, such as cutting redundancies, deregulated nations with strong economies, instituting pay freezes in the public sector, such as Hong Kong and Singapore. Liberals and reducing pensions in order to slowly often defend their views, suggesting that rebuild their country after the devastating Thailand and the US have completely recession. Recent events have caused different situations: Thailand is a mass Greece’s economy to drain further, resulting producer of items, while the US boasts a in a climbing unemployment rate. While service-based economy, with more imports liberal views generally support the efficiency than exports. There is also a vast difference of government regulation of the economy to in the populations of the two nations, as the improve issues such as unemployment, United States’ population stands at three Greece’s decline is evidence that this idea is hundred million, more than thirty times not always valid. Liberals defend their ideas Thailand’s nine million. by stating that the Greek government is In the economically drained Greece, inefficient, and the issue could be remedied the current unemployment rate has reached by a generally more efficient government. an all-time high of 27%, the highest figure of However, conservatives consider the unemployment recorded in the European situation in Greece a victory in the sense that Union so far. The Greek government has their opinions on government involvement in failed to maintain their economy because of the economy have proven true in Greece’s major spending cuts and unneeded case. However, fixing Greece’s economic regulation that ultimately led to their disparity- just like fixing the problems in the downfall. According to the terms of the US- proves more difficult than either group’s rescue funds for Greece, the country apparent certainty seems to suggest. absolutely must to agree to substantial

Nickel for a Milkshake to Five-Dollar Footlongs:

From a

How Inflation Pinches Pennies into Dust

By: Faron Stalker, Chloe Mansour, and Dominique Campos

nflation, or the general rising of prices, can be a huge and costly disruption to the United States economy. In recent years, as well as throughout history, we have seen the economy go through periods of inflation, as well as deflation. Deflation is a decline in the general levels of prices. While both prove to be harmful to the economy, inflation can be seen more readily on a dayto-day basis. When the prices of gas go up by just a few cents one day, this is an example of inflation. It is not uncommon that many people will start to complain about the rise in prices, and this is because inflation, if it gets worse and worse, can turn everyday products, such as gasoline, into luxury items. If inflation does indeed worsen, there is always the possibility of the economy experiencing hyperinflation.

Hyperinflation occurs when the inflation rate is in the 500 percent or above range in a given year. However, not to fear, this doesn’t happen frequently. But when it does, there is usually a total monetary collapse in store. During World War II, Hungary set the record for hyperinflation – 828 octillion pengös was said to equal 1 prewar pengö.

So, this leads to a very important question: What exactly are the causes of inflation? While there is no definite answer, economists believe that there are a few main causes of inflation. Among these are demand-pull inflation, cost-push inflation, wage-price spiral, or excessive monetary growth. Demand-pull inflation occurs when all sectors in the economy attempt to buy more goods and services than the economy can produce. This scenario causes a shortage, which therefore causes prices to go up. Cost-push inflation explains that when input costs rise, the cost of products for

manufacturers increases as well, and thus inflation ensues. The wage-price spiral theory claims that the inevitable increasing of wages and prices becomes difficult to stop, therefore continuing to "spiral" out of control. The final likely cause of inflation is excessive monetary growth, and this explanation is the most popular one out of the four. It claims that inflation occurs when the money supply grows faster than the real GDP. All three causes of inflation hold valid explanations, as well as disrupt the stability of the economy. But where there are causes, there are also effects.

Once inflation takes place, there are, of course, consequences that follow. Just like there are four main causes of inflation, there are also four main consequences: reduced purchasing power, distorted spending patterns, encouraged speculation, and distorted distribution of income.

Reduced purchasing power is when the dollar loses value over time because it can't buy as much as prices rise. Distorted spending patterns refers to the consumers' tendency to spend what money they do have on different products than usual. Encouraged speculation is when after inflation, consumers may try to take advantage of rising prices, but end up losing money on the deals overtime. And the final effect of inflation, distorted distribution of income, examines the people who lose money as a result. Usually creditors tend to lose more money than debtors because loans are repaid after but with dollars of lesser value.

As measured by the Bureau of Labor Statistics, the United States had an inflation rate of 2% in February 2013. This number is 1.35% below the average inflation rate from 1914-2013. The record high inflation rate that the nation has experienced was 23.7% in June 1920 and the record low occurred just one year later at -15.8%. Although the current inflation rate is lower than the national average, it has increased from only

1.6% in January of 2013. This is partly due to the 9.1% increase in the gasoline increase which accounted for a major part of the 5.4% rise in the energy index overall. Although the United States’ economy has suffered much over the past few years, it is clear that the economy is on the mend as the inflation rate has decreased from 3.9% in October 2011.

Although it may seem like the U.S. economy was greatly troubled in 2008, this struggle pales in comparison to that of Zimbabwe. Zimbabwe is one of the most obvious examples of hyperinflation today, with the peak of their troubles falling on November 2008 when inflation reached 89,700,000,000,000,000,000,000%.

This inflation is due to many causes. Zimbabwe was previously a British colony called Rhodesia and once it gained its independence, the country had great economic promise due to its successful tobacco crops and successive non-drought years. However, once president Robert Mugabe took power, the downward slope began. Mugabe redistributed much of the land from rich, white men to black farmers.

Although this change had good intentions, many of the black farmers were inexperienced and so the food production levels dropped dramatically. Zimbabwe’s banking sector collapse followed shortly thereafter, meaning farmers were unable to attain loans in order to help start up their farms. Finally, Zimbabwe got rid of its currency, the Zimbabwe dollar, in 2009 and still to this day has not replaced it, but

instead depends on the currency of other countries. Bread in was recorded to cost $550 million Zimbabwe dollars at one point, and steep prices such as this have led to the creation of a black market. Such high prices have greatly decreased the purchasing power, or amount of something that can be purchased with one unit of currency, of Zimbabweans. The black market, however, increased the purchasing power slightly by offering things at lower prices such as bread for $10 billion Zimbabwe dollars. Many economists have theorized on how to mend the Zimbabwe economy, such as stopping the printing of unlimited currency and declaring a foreign currency the official currency of the nation, but the country has not yet adopted any of these methods and is still struggling greatly.

Inflation has plagued many economies throughout history, including that of the United States and more seriously and currently, Zimbabwe. When experiencing inflation, the citizens of a country lose their purchasing power if their wages have not been adapted by adopting a system of real wages. When a country has nominal or unadjusted wages, the inflation will decrease their purchasing power and therefore discourage the citizens greatly.

GDP and

The Cycle Business

T

he U.S. is like the sun: constantly burning resources, even when the lights are out. Therefore, the government must monitor the rate at which consumer produce, retain, invest, and, of course, consume. To do so, the government created the National Income and Product Accounts (NIPA), which collects data about the U.S. economy’s health and performance.

An important macro measure, Gross Domestic Product (GDP), aids the measurements of NIPA. GDP measures the entire country’s output of goods and services in one year and gives a dollar value on the production. One of the most efficient forms of measuring a country’s performance is calculated by adding total compensation to employees, gross profits for incorporated and unincorporated firms, and taxes less than any subsidies. However, the Expenditure Method is the more common approach and is calculated by adding total consumption, investment, government spending, and net imports. However, this method does not account for every single purchased good, service, or structure.

Therefore, economists estimate the rate of our economy every three months. However, many economic activities are unaccounted

20 15 10 5 0

for, such as the underground economy, which is full of unreported legal and illegal activities that do not appear on the GDP statistics. Since GDP is only the final output of the product for sale, expenses are built in to how much the product costs to make for example with a book, the costs of ink, paper, and effort are all included in the final value.

Generally, prices rise in the growing economy of the United States and, therefore, economists must adjust the U.S. GDP every year to account for inflation. Economists use a base year to compare and predict the outcome of the current year's GDP. Contrarily, “real” GDP is used to adjust the amount prices rise. Real GDP differs from current GDP because it does not adjust for inflation each year. The current GDP of the U.S. is important because it represents the total dollar value of all goods, services, and structures produced over a specific time period. This value represents the health of the U.S. economy and the country as a whole. As one can imagine, economic production and growth, which GDP represents, has a large impact on every contribution entity to that economy. For example, when the economy is healthy there will typically be low unemployment and high wages as demand for labor grows to United States GDP from 2005 to meet the large demand present for product.

A significant change in GDP, whether up or down, usually has a significant effect on US the stock market. The reason is clear: a suffering economy 2005 2006 2007 2008 2009 2010 2011 2012

indicates lower profits for companies, which in turn causes lower stock prices. Investors often worry about negative GDP growth while economists use it, among other factors, to determine whether an economy is in a recession.

While GDP is an important factor in determining the health and wellness of a country’s economy, many other factors affect a country’s GDP that do not necessarily indicate a suffering economy.

One such factor is called the business cycle, or four natural stages of growth and decay that occur in every economy. The business cycle follows two general trends: expansion or contraction. During expansion, an economy recovers and grows; during contraction, recesses to differing degrees.

The different stages of recession are referred to as “early recession” and “late recession.”

While the general trend of an economy may be upward, the current trend may be downward as it enters into a recession, as indicated by the graph below. In this way, a country may have a healthy, thriving economy overall, but have a relatively low GPD because the country currently resides in a recession.

Such is the current state of the US economy: strong overall, but currently in a recession. What remains to be seen is the direction the US economy is travelling. If the economy moves toward recovery, it has already progressed through the “trough,” or the lowest point of the recession, and is travelling toward the “peak” of the cycle.

However, if the economy is in early or late recession, it has yet to reach its lowest point.

However, most economists predict that the

US economy will begin recovery in the due time.

The recovery or growth of an economy depends on many factors, such as the size of the national debt. For example, if an economy is growing with little or no debt and consumers demand is high, the economy is in a growing period. In such a case, a country’s GDP would be very high.

However, rapid economic expansion and a quick rise in GDP may indicate that a recession is on its way. The business cycle also fluctuates depending on trade, production and economic activity. In this way, the same factors that determine an economy’s place in the business cycle also determine its GDP. However, GDP can also indicate economic stability within the business cycle. For example, most South American countries have a very low GDP, so their business cycle fluctuates more than Canada which has a far stronger GDP. Almost any factor can cause the cycle to switch such as over consumption or under consumption which cause change in the cycle because there is little money coming into the economy.

The U.S. business cycle was affected most by the national debt and the war in the Middle East which threw the economy into turmoil. Many other factors affected this cycle and many others country were affected as well. Availability natural resources such as our precious oil and coal also made a huge impact on the business cycle because of scarcity and great demand. The business cycle is a complex always changing tool we use in most of every economy. We must watch and take care of the things we do to affect it so we don't stay in turmoil.

You cannot buy your way out of recession or borrow your way out of debt.

SAY NO TO BAD LOANS This message was brought to you by the Bureau for Economic Recovery and Success. It is not a replacement for legitimate financial advice and is intended only to remind the consumer of a well-known concept of economics. Please seek the help of your economist if you experience a recession lasting more than 4 years.