How the Economy Works: A Simple Analogy
The economy can be thought of as a spring, mass, and dampener system. The spring represents the economy's ability to grow, the mass represents the economy's inertia, and the dampener represents the economy's ability to adjust to shocks. When the economy is growing, it is like a spring that is being stretched. The further the spring is stretched, the more potential energy it has. This potential energy can be released as the spring contracts, which causes the economy to grow even faster. However, if the economy grows too quickly, it can become overextended. This is like a spring that is stretched too far. When this happens, the spring will eventually snap back, which can cause the economy to contract. The mass of the economy represents its inertia. This means that the economy will tend to resist change. If the economy is growing, it will tend to continue growing, even if there are some negative shocks. Conversely, if the economy is contracting, it will tend to continue contra