American Recession

Published on May 2019 | Categories: Documents | Downloads: 25 | Comments: 0 | Views: 321
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Submitted By Birabrata Chakraborty

C] What is Recession? Recession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product)

GDP = Value of all the reported goods and services produced by the people operating in the country GDP = MONEY VALUE OF {C + I + G + (X ² M)} C = Consumables, I = Gross Investments, G = Government Spending, X = Exports, M = Imports

Cause of Recession ?

America in recent trends, experienced a rising economy

leading to people thinking about good times, which lea People Buying More Things like Homes, Cars, etc due to ´Feel Goodµ factor This leads to Boom in Market Sectors Like Housing, Home Products, etc

Banks and Finicial Institutions Offer Attractive Loans to Attract Such Consumers an Sub-Prima Consumers , i.e Lower to Middle class Consumers

Reported cause : Real Estate and Inflation due to it People buy home on Loans Due to Rising Real Estate Finicial Institutions and Banks complete,for consumers This gives Rise to giving Loans to Defaulting Consumers Banks take over homes of defaulters and try to sell them But Banks have to sell homes at loss,due to low prices Due to This,Banks go into loss,leading to a finicial crunch Banks and Institutions create loans to save from CONTINUED Bankrupcy

IN NEXT SLIDE

Reported cause : Real Estate and Inflation due to it

Banks and Finicial Institutions started ´Cost Reductionµ activities

i] Reduce Mortage rates

ii] Lay off people

iii] Salary reduction to ´Not laid off peopleµ

People still unable to Pay EMI·s

Low or No income to spend and buy goods

They became careful due to the fear of loss of job

This tightens Finicial Demand for other goods Crunch in Banks & Institutions come down

Started saving money instead of spending

To escape bankruptcy,Banks lays off people

Demand for other goods come down

So, you can see how the hit on Banks and Finicial institutions can affect ´Un-relatedµ industries in the end;

One industry can hit many other industries when the confidence level of millions of consumers & produce drastically comes down;

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F] How to know recession? Indicators to say a nation is in recession;

- People buying less stuff - Decrease in factory production - Growing unemployment - Slump in personal income - An unhealthy stock market

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