The economy shift

I am going to define about an economy effect. Before I talk about that, I make a clear to you about inflation, disinflation, and recession. Inflation means an economic condition in which prices rise steadily throughout the economy, also a rising economy and kept high degree and value of money. Disinflation means an economic condition in which the rate of inflation moderates, also a falling economy and turn down degree. Next, recession means a temporary downturn in economy activity, which is indicated by two consecutive quarters of a falling GDP. Actually, a circulation of money is important to develop an economy. However, if circulation of money is not working, an economy will fall recession. Let’s know what happens when an economy shifts from a period of high inflation to a period of disinflation.

First, money will be not a circulation. If an economy shifts to a period of disinflation, many goods will have high price because demand is bigger than supply. It is a general situation that it is the same level between a demand and a supply. However, if these two were unbalance, an economy system will be broken. Also, if supply of goods will decrease, these goods will increase value. For example, a sports car is a very special car in the world because of specific design, so it can be higher price. Therefore, if an economy goes to a period of disinflation, and then many goods will be higher price, many people doesn’t want to spend money.

Second, many people will lose their jobs. Many companies will reduce workers because they cannot make goods any more, also they do not have a lot of money because many people don’t want to spend their money; so many companies cannot get money. For example, when Korea needed to help from IMF, Korean companies had to reduce workers. And then Korea had a lot of jobless people.

Third, many people will not spend their money. They want to save their money. Because they will lose jobs, they cannot get money. If so, both company and people cannot get money, and it is obvious that country will fall seriously to panic of an economy. In 1997, Korea had a big panic of the economy, so IMF helped us to support money. During falling a panic of the economy, Korean lost their jobs, and many companies had to close companies. This situation would still continue for 4years and many graduate students had to go abroad or take a rest because they couldn’t get a job.

In conclusion, I think that it will be continue because these have a deep relationship. During disinflation of an economy, if country wants to escape from disinflation, the government should help them. For example, the government should untie their money, make low taxes, and create new jobs. Also, the government ought to support companies.