assignment-2

INTRODUCTION

In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

MEANING AND DEFINITION

According to an economic statistician Julius Siskin, one of the parameters of defining the recession is when there are "two down consecutive quarters of GDP".

The NBER defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

TYPES OF RECESSION OR SHAPES

The type and shape of recessions are distinctive. In the US, V-shaped, or short-and-sharp contractions followed by rapid and sustained recovery, occurred in 1954 and 1990–91; U-shaped (prolonged slump) in 1974–75, and W-shaped, or double-dip recessions in 1949 and 1980–82. Japan’s 1993–94 recessions was U-shaped and its 8-out-of-9 quarters of contraction in 1997–99 can be described as L-shaped. Korea, Hong Kong and South-east Asia experienced U-shaped recessions in 1997–98, although Thailand’s eight consecutive quarters of decline should be termed L-shaped.

IMPACTS

Ø UNEMPLOYMENT- The full impact of a recession on employment may not be felt for several quarters. Research in Britain shows that low-skilled, low-educated workers and the young are most vulnerable to unemployment in a downturn. After recessions in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original levels. Many companies often expect employment discrimination claims to rise during a recession.

Ø BUSINESS-Productivity tends to fall in the early stages of a recession, and then rises again as weaker firms close. The variation in profitability between firms rises sharply. Recessions have also provided opportunities for anti-competitive mergers, with a negative impact on the wider economy: the suspension of competition policy in the United States in the 1930s may have extended the Great Depression.

Ø SOCIAL EFFECTS- The living standards of people dependent on wages and salaries are more affected by recessions than those who rely on fixed incomes or welfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being.

Ø BANCRUPTCIES

Ø DEFLATION

Ø CREDIT CRUNCHES

CONCLUSION- Thus from the above discussion this conclusion can be drawn that no matter whether the recession is taking place in one part of the world or the other but it has a grand global effect. It affects each and every sector directly or indirectly. When there is an imbalanced relationship between the three sectors of the economy i.e. Household sector, corporate sector and govt. sector, the recession develops. So in order to help it, there should be a balanced economy.

Submitted by:Apex regiment

Prateek kumar sharma

Mba1 A

Roll no 54

Rinni /Mba b

Urvashi/Mba C