Unless you have been living in a cave high up in the mountains somewhere, you will know that the economy has entered into a recession.
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When a country goes into recession, it means its economy is declining; there is a decline in its gross domestic product, or GDP. When a considerable portion of the population is in work, the economy will be strong. Demand for goods will be strong. But this demand will escalate until the availability of goods cannot keep up. This means an increase in costs, which is called inflation. The cost of goods goes up and therefore wages need to go up too. As employment costs go up, so do the costs of everything else. Costs become too high and consumers have to stop buying as much. Demands are reduced and companies start to let go of labour. As demands go into decline, so do the cost of goods – thus the economy goes into a recession. This is tackled by companies reducing the cost of their goods to encourage demand again. The demand will begin to escalate once more and the process starts all over again. Generally speaking a country’s GDP should decline or two full quarters before the economy is declared to be in recession. A 1.5% increase in unemployment over the course of a year is considered a key indication of a recession. A recession that lasts up to a few years is known as an economic depression. Sometimes massive drops in the stock market have been followed by a recession; some believe this is one way to predict it. This is referred to as a stock market ‘crash’. A decline in the property market can also predict a recession. Recessions can be triggered by a change in a currency’s value, a rise in energy costs due to shortage, the outbreak of war, and an excess of supply which leads to companies letting go of labour.
The effects of a recession or economic depression can include people and companies going bankrupt due to the obvious financial disadvantages; a credit crunch – in which the availability of loans in greatly reduced; deflation (a reduce in the cost of goods); foreclosure – in which an owner is forced to give up their property; and unemployment, obviously. In the current recession, effects such as lack of spending and unemployment are worse than they have been in 20 years. Governments tackle recessions by increasing their spending and reducing taxes, but considering the severity of our current circumstances it could take a long time for the economy to recover. Property values, pensions and other important investments have been hard-hit. I think it’s safe to say that most people in employment are wondering if they’ll be keeping their jobs. Around 2.6 million jobs were lost in the United States in 2008. Recessions are normal and occur frequently within the business cycle. But if the recession as we know it carries on like it is, we are likely to be heading for an economic depression.
When a country goes into recession, it means its economy is declining; there is a decline in its gross domestic product, or GDP. When a considerable portion of the population is in work, the economy will be strong. Demand for goods will be strong. But this demand will escalate until the availability of goods cannot keep up. This means an increase in costs, which is called inflation. The cost of goods goes up and therefore wages need to go up too. As employment costs go up, so do the costs of everything else. Costs become too high and consumers have to stop buying as much. Demands are reduced and companies start to let go of labour. As demands go into decline, so do the cost of goods – thus the economy goes into a recession. This is tackled by companies reducing the cost of their goods to encourage demand again. The demand will begin to escalate once more and the process starts all over again. Generally speaking a country’s GDP should decline or two full quarters before the economy is declared to be in recession. A 1.5% increase in unemployment over the course of a year is considered a key indication of a recession. A recession that lasts up to a few years is known as an economic depression. Sometimes massive drops in the stock market have been followed by a recession; some believe this is one way to predict it. This is referred to as a stock market ‘crash’. A decline in the property market can also predict a recession. Recessions can be triggered by a change in a currency’s value, a rise in energy costs due to shortage, the outbreak of war, and an excess of supply which leads to companies letting go of labour.
The effects of a recession or economic depression can include people and companies going bankrupt due to the obvious financial disadvantages; a credit crunch – in which the availability of loans in greatly reduced; deflation (a reduce in the cost of goods); foreclosure – in which an owner is forced to give up their property; and unemployment, obviously. In the current recession, effects such as lack of spending and unemployment are worse than they have been in 20 years. Governments tackle recessions by increasing their spending and reducing taxes, but considering the severity of our current circumstances it could take a long time for the economy to recover. Property values, pensions and other important investments have been hard-hit. I think it’s safe to say that most people in employment are wondering if they’ll be keeping their jobs. Around 2.6 million jobs were lost in the United States in 2008. Recessions are normal and occur frequently within the business cycle. But if the recession as we know it carries on like it is, we are likely to be heading for an economic depression.
