Global Economic Recession – Tidbits About The Economic Recession Effects

What is Economy Recession?

Global economic recession has been the most heated up topic of debate these days! The current inflation recession has suddenly peeped through to arrest the economy growth world wide, but most of us can’t understand the reasons and causes behind it, although we look for it. The current global economic recession is one such situation that has thrown the world’s employment structure in deep soup!
The economy that grew over a phase of time tends to dawdling down. An economy characteristically grows for six to ten years and then goes to recession for six months to more than a year. The declining curve of the business life cycle is the economic recession. The first quarter of negative growth in a recession cycle is often followed by positive growth for several quarters, followed by another quarter of negative growth. The economic recession is the negative growth of GDP for two consecutive quarters or more. The official agency in charge declared that the economy is in a state of recession in the National Bureau of Economic Research.

What Causes Recession?

A recession is primarily caused by the measures adopted to control the money flow in the economy.

The Federal Reserve is responsible for maintaining an ideal balance between money supply, interest rates, and inflation. When The Federal Reserve falters with this equation, the economy is forced to correct itself.

The Feds monetary policy of injecting huge volume of money supply into the money market has kept interest rates lower while inflation continues to rise. The economic recession affects a nation or the global economy as a whole in many ways. Inflation recession is a general rise of the prices of goods and services over a substantial period of time. The higher the rate of inflation, the smaller the amount of goods and services that can be purchased with the same amount of money. During such global economic recession, people tend to cut out overall spending and emphasize to save more. The individuals and businesses cut down expenditures and udergo a cost trimming operation, this causes GDP to crash. Unemployment rates rise as companies lay off workers to cut costs. It is these combined factors that cause the economy to fall into a recession – very much like a vicious circle.

These circumstances doubled with relaxed policies in lending practices making it extremely easy to borrow money can result in unsustainable economic activity and the economy coming to a near halt.

It is also said that recession can happen by factors that inflict short term growth in the economy, such as spiking oil prices or war. However, these are mostly short term in nature and rectify themselves in a quicker manner than the full blown recessions that have occurred in the past.

Economic Recession Effects

An economic recession can usually be felt before it happens. There is a tendency to see the economic environment changing in quarters preceding the actual onset. The growth in GDP will still be present, it will show signs of sputtering and you will see higher levels of unemployment, decline in housing prices, decline in the stock market, and business expansion plans coming to an hold. When the economy sees prolong periods of economic recession, the economy can be termed to as being in an economic depression.

The positive thing of Economic recession is that it rectifies Inflammation During an economic decline or recession, high yield stocks such as FMCG, pharmaceuticals, and tobacco tend to hold up better

Strategies to rectify Economic Recession

The Strategies pushing an economy out of a recession varies depending on which economic genre the policymakers follow. While Keynesian economists may suggest deficit spending by the government to ignite economic growth, supply-side economists may suggest to trim tax to promote business capital investment. Laissez-faire economists may simply recommend that the government not interfere with natural market forces. Both government and business have responses to recessions.