Quake+to+Slash+Japan's+Economic+Growth+-+Kaki

Source: http://au.news.yahoo.com/thewest/business/a/-/world/9243376/quake-to-slash-japans-economic-growth/ Date: April 21, 2011 Title: Quake to Slash Japan's Economic Growth

Summary: After the earthquake hit Japan, the predicted GDP growth for this year has dropped from the original 1.7% to a 0.8%. This is because the economy has shifted its efforts from producing more output to helping rebuild Japan. But the nation still struggles with many issues such as the damage of factories, slowing the output of the nation’s economy. Generally speaking, the disaster has resulted in a decrease of factors of production for many markets. Some of the major industries that are greatly affected by the earthquake and the tsunami include the agriculture and automobile industry. But massive government and business investment in reconstruction is expected to drive a sharp rebound in 2012, with the economy seen expanding 2.3 per cent, up from the OECD's previous estimate of 1.3 per cent given in a November report. But, this is only a prediction of how the future economy would grow. But another problem that has hit the Japanese economy is the deflation of the currency, and this has contributed in slowing down the economy with consumers less likely to spend money on unnecessary goods. Because this article has to deal with Japan’s economy as a whole, it involves macroeconomics.

Economic Terminology:

GDP (Gross Domestic Product)- The total value of final goods and services produced by an economy over a period of time

Factors of Production- All the aspects required to run a market economy (Land, Labor, Capital, Management)

Deflation- the decrease in the general price level of the goods and services in an economy

Macroeconomics- a branch of economics dealing with the performance, structure, behavior, and decision-making of the entire [|economy]

Investment- the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable returns in the form of interest, dividends, or appreciation of the value of the instrument

Graph:

Graph: This is a production possibility curve showing the maximum combination of goods and services that can be produced in an economy for a fixed period of time. In this case, Japan’s economic output has been divided into two types of products: automobiles and agriculture (affected by earthquake the most). Realistically, Japan’s economic output consist of many more types of goods, but this is just a tool for graphical representation. The PPC shows a curve with increasing opportunity cost as more of a particular good is produced. The shift from PPC1 to PPC2 is shown to represent the earthquake’s effects on output (damage and decrease of factors of production)

Evaluation:   When Japan faces a crisis like this one, where resources, factories, and infrastructure is damaged, a good way to approach this would be to seek help from other nations, which is already happening with nations such as the U.S. and China willing to help out. Although it would take some time to rebuild the areas damaged by the earthquake, as long as the country is moving forward with their efforts, the problem would be solved soon enough. The government has also put in a large sum of money in rebuilding the area damaged by the earthquake.

  The problem with looking at the GDP statistic for this event is that it only considers the amount of money being spent. Even after the earthquake, GDP was still predicted to grow (but at a slower rate). It would not make sense to say that Japan's economy has improved because of the earthquake, in fact, the economy has gotten worse with all the destruction that has occurred and all the lives lost. It would mean the country would have to spend more money, but only to fix the problems faced after the earthquake. People should be viewing other statistics that represent the true affect the earthquake has done to the economy, such as the amount of money worth of damage that has occurred, or the death toll. This article clearly shows that GDP is not a good statistic to measure the quality of a nation's economy.