Question: Why do "big" economies, especially the US economy, affect other nations' economies?

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Answer #1:

Probably for the same reasons that Seattle and Portland affect the economy in the rest of Washington and Oregon. Think about it.

Answer #2:

It's hard to simplify it but here it goes:

Basically housing prices fell (Not going to get into why) - that's bad for US consumers because they often borrowed against their homes to buy new TVs or other stuff.

For a country like China or India that exports a lot of products/goods (TVs, Phones) to America - if the US consumer stops buying at the rate they were, it means that China/India will stop producing as much - so it slows their economies.

If banks in the US fail - like they did in the financial crisis, they stop lending to businesses - for a country like Canada that has 80% of its exports going to the US, that is disastrous. Companies and businesses can't get the money to buy the goods they need from Canada - and in turn, Canada loses jobs because there's no longer a demand for - wood or other raw materials.

Answer #3:

Major reason: US has got trade dealings with other major and minor countries - it either buys or sells from them - when their internal conditions change, it immediately affects the quantities of goods they buy or sell to other countries. Being a big economy, a change in their trade volume will create a big impact on other countries, because the volumes are huge. e.g. US uses software companies like Infosys of India, etc. The moment the US slows down, they slow down business with Infosys,etc.

Answer #4:

In addition to vertical reality's answer:-

Since the very integration of the various nations economies to each other or to say the establishment of what we refer to the Global Economy today (think trade), what we exist within (socio-economically speaking) is a huge complex system where its easy to say that "A butterfly flapping its wings in Japan can cause an earthquake somewhere as far as the pacific (or even avert it)"

Answer #5:

Because all of our economies are tied together.

What happens in one nation's economy can affect another nation's economy and that can keep going, like the domino effect.





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