How the Economy Works Blog

The economy as we know it is in constant fluctuation, so much so that it has become increasingly difficult to predict where our economy is heading in the future. The reason for this is complex, but at its base, it is quite simple. The future is uncertain, we cannot know where we will be in 5, 10, 15 years, all we can do is go with out gut feeling and hope that the future aligns with our instincts (pg. 2 Ip). The state of the economy can be in one of two states. The first is a bull market. A bull market economy occurs when share prices begin to rise, encouraging people to buy more. The second is a bear market. A bear market is the opposite of the bull where prices fall, encouraging more selling. Both of these economic states are constantly contending until a perfect "equilibrium" is found. Throughout history, the economic patterns of the bull and bear market differ. The bear is often used when the country faces a economic disaster such as the Wall Street Crash of 1929 which led to the Great Depression. The bull is used during a relief period of economic recovery from a disaster. These markets only occur during depressions which as results of recessions. Recessions are a short period of economic strife. A depression on the other hand is a prolonged time of economic disaster.

The Underground Economy

The "Underground Economy" is a term used for the system where workers who can't find a full-time or regular job are paid under the table. The services they are getting paid for are not always illegal however. Anecdotal evidence shows that the system applies to personal and domestic workers such as housekeepers and nannies. This system is a double edged sword however, it can be beneficial while at the same time it can be problematic. On the beneficial side is the fact that there is a surge in consumer spending, consequently boosting the economy. This system also gives those who have a hard time finding a job in the current economy a chance to work, maybe not for much, but at least for something. On the negative side however, workers who are paid under the table are not taxed. According to the International Revenue Service, over $500 billion in taxes were lost due to unreported wages. There is also the strong likelihood that workers who are forced to work in these conditions will be exploited by businesses.