Effects of Recession on u.s Economy

8/8/2019 Effects of Recession on u.s Economy

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[BUSINESS ENVIORNMENT]

TOPIC EFFECT OF RECESSION U.S.A

ECONOMY

INDEX


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1. MEANING AND OVERVIEW OF

RECESSION

2. INDICATORS OF RECESSION

3. ILL EFFECTS OF RECESSION

4. U.S.A RECESSION

5. KEY DATA

6. HISTORY OF U.S.A RECESSION

7. COUNTRIES AFFECTED BY RECESSION

8. AFFECT OF RECESSION ON ASIAN

ECONOMIES

9. INTERPRETATION AND ANALYSIS

10. BIBLIOGRAPHY


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RECESSION

RECESSION: AN OVERVIEW

MEANING: A recession is general slowdown in economic

activities for a long period. It is just like a business cycle

depression. During recession employment, investment

power, personal and household incomes of the people

decreases and unemployment bankruptcy situation

increases in the country. The recession is not confined

only within a country but its ill effects also affects

adversly the adjourning countries or the countries whose

economirs are related with that particular country.

Depression is a worst financial crisis situation for a

country.

DEFINITION: A period of general economicdecline;

typically defined as a decline in GDP for two or more

consecutive quarters. A recession is typically

accompanied by a drop in the stock market, an increase

in unemployment, and a decline in the housing market. A
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recession is generally considered less severe than

a depression, and if a recession continues long enough it

is often then classified as a depression. There is no one

obvious cause of a recession, although overall blame

generally falls on thefederalleadership, often either

the President himself, the head of the Federal Reserve, or

the entire administration.
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INDICATORS OF RECESSION:

1 ) SAVINGS: during recession savings of the private

sector increase this happens because of the reason that

people dont like to spend more durinfg this situation.

Because of decrease in unemployement rate people

started to save more and more money and spends a very

less amount. Because of increase in saving by privatesector they tends to decrease savings of the public

sector.

2) CONSUMPTION: Because of the fact that the

investment power of the people decrease in the

recession people fear to purchase. Because of which

consumption also tends to fall.

3) INVESTMENT: Because of increase in saving and

decrease in consumption power investment also

decreases. People are not so much confident to invest

during recession as they feel that their money may go in

wain because of market downfall. So they dont invest or


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invest a very less amount of their capital during

recession.

4) GOVERNMENT SPENDING: government spending

increases during recession because of the fact that the

government have to spend a lot of money in order to

increase employment. Government also have to spend a

lot of money on mainmtaining stability in infrastructure.

5) AGGREGATE DEMAND: Because of the all above

facts that consumption power decrease, and even

decrease in investment power.these factors leads to

decrease in aggregate demand in the economy.


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We have so much to discuss on recession. We generally

say that recession is bad, but some of wont be knowing

what the recession actually mean and what are the ill

affects of recession on a common man. We know that

recession leads to lower national income and even

decrease in nAtional output.

Sevaral illeffects of recession :

1. RISE IN UNEMPLOYMENT: although this is a slow

process but the unemployment in the country

decrease. Because of the crisis in the industries

companies have to remove so many employees. It

takes a lot of time for employment to increase.

2. RISE IN GOVERNMENT BORROWINGS: Recession

is a worst situation for the government. Because of

recession the revenues from the tax decreases but

the investments of government increases. It is

forcasted that UK have to borrow 60 billion dollor.

This situation may even become worst in upcoming


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years. Because of these loans higher taxes and

higher interst payment situation arises in the future.

3. FALL IN SHARE PRICES: Because of recession

profitabilty and dividends also lower down. Which

leads shares to be even less atrractive. Share prices

also falls because of the future expeectation of

recession. We should remember that share prices

may also gfall because of other reasons it not only

depend upon recession.

4. Lower down inflation rate: because of recession

inflation also slows down.

5. Fall in investment: because of fall in the economy

growth rate of an economy the investment power

also lower down.


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US RECESSION

HOW RECESSION STARTED:

Almost in the middle of 2006-2007 the real state

business was at the peak in U.S.A. And were arising

so many possibilities and miss conceptions. It was

estimated that the prices of real estates will rise to a

great height in the future.

Because of these possibilties banks started providing

easy access loans to public on a very low rate of

interest. Government and banks were anticipating

that this money would be recovered very soon.

But it was only a missconception. Soon interest rates

started rising and inverse to that house prices also

started lowering down moderately. Now the public

was not able to pay back the loan. Which resulted for

the banks and government to refinance its money.

Soon defaults and contraversies started happening.

And the prices also didnt rises as the government

was expecting.


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This resulted in a big loss to banks and government

with a large part of mortgage holding securities. And

the banks become insolvent and even put

INTERNATIONAL FINANCIAL MARKETS UNDER RISK OF

COLLAPSING.

This panic of uncertainity in the international

financial markets quickly resulted in the dectrease of

credits capacities.

Slowly this situation flourished in the whole world

leading to global recession.

Althogh different economies tried their best to protect

themselves from these effects but the affect was so

extensive that no one was aloof fromm the effect.

Althogh different countries were affected on different

levels and INDIA was the least affected country. But U.S.A

was worst affected country


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6.

HISTORY OF US RECESSIONS

According to different economists since the year 1854,

U.S.A have faced almost 32 cycles of expansions and

recession. The average is of 17 months of recession and

38 months of expansion. But from 1980 there are only 8

times when U.S.A faced recession. But majorly these

recessions can be classified into four.

1. From july 1981 to november 1982. This was of 14

months.

2. From july 1990 to march 1991. This was of 8 months.

3. From march 2001 to november 2001. This was of 8

months.

4. From december 2007 to current. Period is still not

estimated.


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Current recession is facing fall in private consumption

first time since last 20 years. This shows how severe this

recession is. Confidence of conusmer very low .So it will

take a very long time for the economy of the country to

recover from recession.

FEW COUNTRIES WHICH ARE ALSO FACING

RECESSION ARE:

1. UNITED KINGDOM

2. IRELAND

3.CANADA

4. JAPAN

5.CHINA

6. INDIA

7. NEW ZEALAND.


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India and china is not actually facing the recession but

only economic slow down. Australia prohibited itself from

the global recession rather it has made an overall growth.


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Americans who saved their money have already invested

that in their housing, car and other facilities. The U.S.Aeconomy has seen its peak but now its going into a

downfall situation.

Now americans are themselves jobless and they are

approaching to others countries to search for the jobs.

Asians countries are providing more job opportunities ascompared to america.


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EFFECT OF RECESSION ON ASIAN ECONOMIES

In the beginning many people felt that decouplingtheory would apply. This theory says that asian

economies wont be affected from usa recession. But in

actual sense this theory dont work at all. Almost all the

asian economies were affected by this. But still sian

countries are in a better position as compared with us

downturns.

U.S.A treated as the reason for all the problems.

Situation of panic in asian markets and stock

exchanges.

Fall in the share values.

Continuous fluctuation in the asian stock exchanges.

Rise of oil prices in asiian markets.

Many of the adjourning companies which had their

alliances with U.S.A companies are closed.

Exports and imports are turned into mess.


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Before singapore export 20% of theeir total gdp but

now this decreases by 11%.

India is also the affected country from recession.


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INTERPRETATION AND ANALYSIS

Here we can say that A recession is general slowdown in

economic activities for a long period. It is just like a

business cycle depression. During recession employment,

investment power, personal and household incomes of

the people decreases and unemployment bankruptcy

situation increases in the country. The recession is notconfined only within a country but its ill effects also

affects adversly the adjourning countries or the countries

whose economirs are related with that particular country.

Depression is a worst financial crisis situation for a

country.

U.S.A The most powerful country in the world is in the

grip of recession. Although it was the source of recession

and which later spread to other countries. But it can be

truly said that U.S.A is brilliantly facing the recession. It

has succeded in maintaing its GDP upto 1.0 and home

price is estimated to decline by 10% in 2009.

U.S.A has faced recessions recessions so many time even

before and all the time it has emerged as a more


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powerful country. Data on U.S.A history explains

everything about that. U.S.A is the leader of the world.


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BIBLIOGRAPHY

1. http://en.wikipedia.org/wiki/Late-2000s_recession

2. http://en.google/recession\HARDEST HIT BY

RECESSION

3. http://www.wikinvest.com/concept/U.S._Economic_Cy

cles

4. http://www.sjsu.edu/faculty/watkins/USecon08.htm

5. http://www.house.gov/jec/economic_conditions.html

6. http://www.articlesbase.com/business-

articles/marketing-strategy-during-recession-

684098.html

AND

MEEEE..
http://en.wikipedia.org/wiki/Late-2000s_recessionhttp://www.wikinvest.com/concept/U.S._Economic_Cycleshttp://www.wikinvest.com/concept/U.S._Economic_Cycleshttp://www.sjsu.edu/faculty/watkins/USecon08.htmhttp://www.house.gov/jec/economic_conditions.htmlhttp://www.house.gov/jec/economic_conditions.htmlhttp://www.articlesbase.com/business-articles/marketing-strategy-during-recession-684098.htmlhttp://www.articlesbase.com/business-articles/marketing-strategy-during-recession-684098.htmlhttp://www.articlesbase.com/business-articles/marketing-strategy-during-recession-684098.htmlhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://www.wikinvest.com/concept/U.S._Economic_Cycleshttp://www.wikinvest.com/concept/U.S._Economic_Cycleshttp://www.sjsu.edu/faculty/watkins/USecon08.htmhttp://www.house.gov/jec/economic_conditions.htmlhttp://www.articlesbase.com/business-articles/marketing-strategy-during-recession-684098.htmlhttp://www.articlesbase.com/business-articles/marketing-strategy-during-recession-684098.htmlhttp://www.articlesbase.com/business-articles/marketing-strategy-during-recession-684098.html

Effects of Recession on u.s Economy

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