how recession affects economics, individuals, bussiness and others?

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How Recession Affects Economics, Individuals, Business And Others? Help With Assignment Recessi on

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Page 1: How Recession Affects Economics, Individuals, Bussiness And Others?

How Recession Affects Economics, Individuals, Business And Others?

Help With Assignment

Recession

Page 2: How Recession Affects Economics, Individuals, Bussiness And Others?

In Economics, Recessions Can Be Found In Business Cycles.

Page 3: How Recession Affects Economics, Individuals, Bussiness And Others?

Business cycles are the total ups and downs of an entire nation or possibly the entire world from time to time, over a period of more than 10 years.

Page 4: How Recession Affects Economics, Individuals, Bussiness And Others?

Recession in Economics is considered to be a decline in economic activity.

Page 5: How Recession Affects Economics, Individuals, Bussiness And Others?

An economy operating at its potential level is said to be at full employment. At full employment, some unemployment occurs.

This is consistent with the shifting of workers between jobs due to changing tastes and technology.

Page 6: How Recession Affects Economics, Individuals, Bussiness And Others?

A recession occurs when GDP falls significantly below its full employment level. 

Page 7: How Recession Affects Economics, Individuals, Bussiness And Others?

The Department of Commerce defines a recession as when real GDP declines for two consecutive quarters.

Page 8: How Recession Affects Economics, Individuals, Bussiness And Others?

Two types of recessions occur:-

Page 9: How Recession Affects Economics, Individuals, Bussiness And Others?

Output can fall if the economy is operating at below its potential (full

employment) level.1

Output can fall if the economy’s potential level of output falls. 2

Page 10: How Recession Affects Economics, Individuals, Bussiness And Others?

The first type of recession occurs when output falls significantly below its full-employment level in a recession. 

Unemployment grows as a large number of workers cannot find work. 

1

Page 11: How Recession Affects Economics, Individuals, Bussiness And Others?

The most dramatic recession of this type was the Great Depression, where 25 percent of the workforce was unemployed and real output fell more than 30 percent. 

Page 12: How Recession Affects Economics, Individuals, Bussiness And Others?

This type of recession usually occurs when consumers and investors reduce their aggregate spending.

Page 13: How Recession Affects Economics, Individuals, Bussiness And Others?

The second type of recession occurs when the economy’s potential output falls.

For example, a nation that passed a minimum wage of $2000 will likely experience massive unemployment and a recession. Its potential output has decreased.

2

Page 14: How Recession Affects Economics, Individuals, Bussiness And Others?

As another example, a decline in efficiency or a decline in technological progress could cause output to fall.

Even if unemployment rises, the economy may still be fully employed in the sense that employers are fully hiring all workers they can.

Page 15: How Recession Affects Economics, Individuals, Bussiness And Others?

Decline due to full-employment output falling below its full-employment

level.

Decline due to full-employment output falling.

The difference between

Is CRUCIAL

Page 16: How Recession Affects Economics, Individuals, Bussiness And Others?

The first type of decline fits recessions described by Keynesian and monetary economists, each giving different reasons for the decline in spending.

The second type fits recessions described by rational expectations economists, who give different reasons for the decline in full-employment output.

Page 17: How Recession Affects Economics, Individuals, Bussiness And Others?

Why Recessions occur

Page 18: How Recession Affects Economics, Individuals, Bussiness And Others?

Two startling facts exist about modern capitalistic economies.

The first is that they have recessions

The second is that most of the time they are not in recessions.

Page 19: How Recession Affects Economics, Individuals, Bussiness And Others?

This suggests that some cause occasionally derails the economy.

Yet, over time, the economy rebounds to full employment.

Page 20: How Recession Affects Economics, Individuals, Bussiness And Others?

But how can an economy recover?

The explanations are given below.

Page 21: How Recession Affects Economics, Individuals, Bussiness And Others?

Monetary Economists

This school of classical economists observes that sudden and large decreases in the money supply or decreases in the rate of monetary growth usually 

precede recessions. 

Page 22: How Recession Affects Economics, Individuals, Bussiness And Others?

While the economy naturally tends to be fully employed, sudden unexpected declines in the money supply will decrease total spending, decreasing the economy until people and prices can adjust to having 

less cash.

Page 23: How Recession Affects Economics, Individuals, Bussiness And Others?

Keynesian Economists

John Maynard Keynes emphasized the importance of total spending and the components of total spending (consumption, investment, government spending and net exports). In particular, he felt that when people 

reduced consumption spending to save more, financial markets in times of uncertainty would be unwilling to spend the new savings on investments. 

Page 24: How Recession Affects Economics, Individuals, Bussiness And Others?

Keynesian Economists (Continue)

The result would be a decrease in total spending. Keynes also believed that prices are sticky – resistant to changes. The mix of less spending and fixed prices means lower output and a recession. Keynesian today put a similar emphasis on total spending and the rigidity of prices for explaining the business cycles.

Keynesian Economists (Continue.)

Page 25: How Recession Affects Economics, Individuals, Bussiness And Others?

For more details you can visit our website at 

http://www.helpwithassignment.com/economics-assignment-help

Page 26: How Recession Affects Economics, Individuals, Bussiness And Others?