Is recession good for economy?

Question no. 53

Is recession good for economy?

Introduction:

Recession is a business cycle contraction, a general slow down in business activity.

According to 'National Bureau of Economic Research' defines "a significant decline in economic activity spread across the economy, lasts for few months, normally visible in GDP, real income, employment, industrial production, and wholesale retail sales"

How recession causes?

An economy which grows over a period of time tends to slow down the growth as the part of normal economic cycle. An economy typically expands for 6-10 years and tends to go into a recession for about 6 months to 2 years.

A recession normally takes when consumers lose confidence in the growth of economy and spend less.

This leads to decrease in demand for goods and services, which in turn leads to decrease in production, lay-offs and a sharp rise in unemployment.

Investors spends less as they fear stock values will fall and thus stock markets fall on negative sentiments.

In my opinion recessions are necessary. Recessions and depressions are equally needed for the growth of the economy. Following are the reasons that why recession is good for economy:-

Ø There is an increase in savings. More money is available for prudent investment for the long term purposes.

Ø Appropriate spending have compelled the retailers to offer the best product at the best possible price. As the banks have forced the consumers to make right choices in spending.

Ø During recession, its important to buy necessary appliances and equipments that one may need in future.

Ø Banks only do better lending so as for the foreseeable future, they may not be a reckless lending

Ø Traffic has been eased as travellers cut back from the airports and on the roads.

Ø Mainly, those who are unemployed have gone into business for themselves, which may have lead to more innovation down the line.

It is said that economy improves little by little without the people ever realizing it. Recession is the painfull medicine that the economy needs to get back to its feet.

Conclusion:

Recession will wipe out the dead brush(bad investments , bad debts), and will leave fertile soil for new and fresh growth (stronger dollar , the return of jobs from overseas, and alower cost of living).

Submitted to:

Mr.Gurdeepak Singh

Submitted by:

Shveta karwal

M.B.A sem-1

Section- A