Economy-Wide Interactions

As mentioned in the Introduction, the economy as a whole has its ups and downs. For example, business in America’s shopping malls was depressed in 2008, because the economy was in a recession. While the economy had begun to recover in 2009, the effects of the downturn were still being felt—not until May 2014 did the number of Americans employed recover to its pre-recession level.

10. One person’s spending is another person’s income.

11. Overall spending sometimes gets out of line with the economy’s productive capacity.

12. Government policies can change spending.
Table :

TABLE 1-3 The Principles of Economy-Wide Interactions

To understand recessions and recoveries, we need to understand economy-wide interactions, and understanding the big picture of the economy requires three more economic principles, which are summarized in Table 1-3.