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OF
[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..
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