...economic cycle is when GDP growth fluctuates around the trend (or underlying) economic growth. A boom occurs when real national output is rising at a faster rate than the trend rate of growth. A slowdown occurs when the rate of growth decelerates – but national output is still rising. A recession occurs when there is a fall in real GDP for two or more consecutive quarters (6 months or more). A slump or a depression is a prolonged and deep recession leading to a significant fall in output and average living standards. A depression is where real GDP falls by more than 10% from the peak of the cycle to the trough. This occurs when real GDP picks up from the trough reached at the low point of the recession. 2. In 2008 Q1, the UK real GDP index is at 104.0, whereas the UK productivity index is at 101.8. In 2009 Q3, the UK real GDP index is at 97.4, however the UK productivity index is at 99.8. 3. In a recovery, aggregate demand increases. Firms will respond to the increase in demand by increasing output. Some firms will already be operating close to capacity and so will need to invest if they want to to meet the growing demand. This is essentially the accelerator theory. Due to this, the increase in investment may be greater than the rise in aggregate demand. Firms investing more (as company profits are likely to rise during a recovery) will lead to a positive multiplier effect, which helps the economy recover more and more. The period of recovery might be accompanied by easy...
Words: 1149 - Pages: 5
...In general the economy tends to experience different trends. These trends can be grouped as the business/trade cycle and may contain a boom, recession, depression and recovery. A business/trade cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real Gross Domestic Product (GDP) and other macroeconomic variables. Samuelson and Nordhaus (1998), defined it as ‘a swing in total national input, income and employment, usually lasting for a period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of the economy’. These fluctuations in economic activity usually have implications on employment, consumption, business confidence, investment and output. The Keynesian Approach, this theory shows how the collaboration of multiplier and accelerator can lead to regular cycles in aggregate demand. The Keynesians believe that economic activity is generally unstable and is subject to inconsistent shocks, usually causing the economic fluctuations and are attributed to the changes in autonomous expenditures especially investment. The Keynesian approach is pretty simple; higher investment will lead to a larger rise in income and output in the short run. This means that consumers will spend some of their income on consumption goods. This will give rise to further increase in expenditure. Ceteris paribus an initial rise in autonomous investment produces a more than proportionate rise in income. The rise...
Words: 1663 - Pages: 7
...so complex and twisted, that as things start to unravel, trust in the whole system started to fail. In turn lack of confidence in the economy has led to what is commonly referred to as the “great recession”. The question left to ask is, where do we go from here? The public is looking for an answer from economists to what will happen next. Because of the lack of certainty in the global forecasts, people are starting to lose confidence in the system. For example, in November 2008, the World Bank predicted the growth of the 2009 GDP to be 0.9%, while the International Monetary Fund predicted a 2.2% growth rate. In January 2009, the IMF revised its forecast to a 0.5% growth rate; two months later, the IMF revised its growth rate again by raising its forecast to 1%. Federal Reserve chairman, Ben Bernanke put it plainly in a speech given to the House Budget Committee by saying, “The uncertainty surrounding the outlook is unusually large.” Some economists have resorted to using three letters of the Roman alphabet to represent the future of the GDP growth. Those scenarios are the “U”, the “L”, and the “W” recovery. In a “U” style economy, economic growth will rapidly recover. There have been large stimulus packages put forth by the U.S. in an attempt to return the economy to its pre recession numbers. The IMF estimates that the G-20 economies will inject a total fiscal stimulus of 1.8% of their combined GDP this year. If the key economies, the U.S. and China, flood their economies with...
Words: 892 - Pages: 4
...PREM AUGUST 2009 N U M B E R 141 ECONOMIC POLICY The Global Financial Crisis: Comparisons with the Great Depression and Scenarios for Recovery Milan Brahmbhatt (PRMVP) and Luiz Pereira Da Silva (DECVP) A recent paper by Eichengreen and O’Rourke on “A Tale of Two Depressions” (publicized by Martin Wolf in the Financial Times) has highlighted some close correspondences between economic performance during the present world recession and that during the early months of the Great Depression that began in late 1929.1 World industrial production from April 2008 to April 2009 fell as rapidly as during the first year of the Great Depression, while stock market prices and world trade volumes have fallen more rapidly than in the comparable period. These comparisons lead Eichengreen and O’Rourke to draw the alarming conclusion that “[I]t’s a Depression alright.” They note, however, that fiscal and monetary policies are likely to be much more supportive of economic activity in the next 1–2 years than they were during the first few years of the Great Depression. The first part of this note outlines some other important structural differences between the world economy today and in the 1930s that are likely to affect how the present recession plays out relative to the Great Depression. The second part of the note discusses possible recovery paths out of the current crisis. 1. Comparing the Great Depression with the Present Global Financial Crisis Larger role of faster-growing developing...
Words: 4313 - Pages: 18
...The United States economy, based on recent history of past recessions, should be going forward and getting better, but is it? According to statistics from Bureau of Economic Analysis (BEA), the United States is still trying to recover. The gross domestic product rate keeps going up and down; it does not keep going up, as it did in past recessions. What is to become of the United States if President Obama cannot get us out of the recession? EXPECTED U.S. GDP GROWTH RATE GOING FORWARD The gross domestic product (GDP) growth rate is an important indicator of the U.S. economic health. The slope of the yield curve – the spread between long and short - term interest rates – is a good predictor of future economic activity. As these slopes shift, you will get periods of high and low growth in GDP. There are three different methods of determining GDP. The first one is estimating each industry’s gross output and subtracts intermediate inputs from other industries to derive each industry’s residual value-added, which is sometimes called the production approach (Wells and Krugman, 2009). The second method is the income approach, which measures the income earned by the different factors of production (Wells et al). The third method is the final expenditures approach, which shows what is happening across different types of spending throughout the economy, usually done annually (Wells et al)...
Words: 785 - Pages: 4
...The Role of Policy in the Great Recession and the Weak Recovery John B. Taylor* February 2014 It’s been nearly five years since the recession of 2007-2009 ended. By all accounts, this very severe recession was followed by an extremely disappointing recovery. Economic growth during the recovery has been far too slow to raise the employment-to-population ratio from the low levels to which it fell during the recession, or to close materially the gap between real GDP and potential GDP, in marked contrast to the rapid recovery from the previous severe recession in the early 1980s or from earlier severe recessions in U.S. history. When you include both the periods of the recession and the slow recovery, economic instability has more than tripled according to a common measure of performance used by macroeconomists: The standard deviation of the percentage gap between real GDP and potential GDP rose from 1½ percent during 1984-2006 to 5½ percent during 2007-2012 (Taylor, 2013). In this paper I consider the role of economic policy in this poor economic performance. I. The Shift in Policy In evaluating the role of policy it is important to consider actions taken before, during, and after the financial panic in the fall of 2008. A careful look at the full decade from 5 years before to 5 years after the panic reveals that there was a significant shift in policy away from what worked reasonably well in the decades before. Broadly speaking, monetary policy, regulatory policy, and fiscal policy...
Words: 3718 - Pages: 15
...planning in how to best improve the overall growth and strength of the company. Concerns with the economic futures must be acknowledged to increase their profits (Larson Scenario, 2010). For Larson to grow, management must make projections based these specific conditions over the next few years that will benefit Larson’s production of batteries and distribute them in the global market. This discussion summarizes courses of action Larson Inc. must consider based on the possible economic future. Alternative Economic Futures Larson Inc. expects to go through economic changes in the next five years that will ultimately determine the economic viability of the company. Recession, recovery, and peaks are guaranteed during this time period. With these imminent economic futures, it is imperative that Larson Inc. instill measures which maximize profitability and productivity in both the American and German markets. The instances of interrupted growth in industry are usually associated with business cycles (McConnell, Brue, & Flynn, 2009). Larson may face several of these changes in the economy and possessing the ability to predict these and how to handle them is a process that must be studied. Summary of business recommendations A recession is a period of six months or more where there is great decline in input, output, and employment (McConnell et al., 2009). While hard to maintain a recession-proof industry, Larson must be able to enact...
Words: 1102 - Pages: 5
...Oil Prices’ Impact on Economic Growth Since 2008, the U.S. has seen one of the slowest recoveries from a recession since the Great Depression. Never before since World War II has either inflation adjusted GDP or unemployment rate been below where it was four years after a recession began. Our economy in this recovery could have grown and created jobs at the average rate like the 10 previous postwar recessions. GDP per person could be $4,528 higher and 14 million more Americans would be working today (Gramm and Solon). Economists claim that the lack of strength in the recovery was due to the depth of the recession and underestimating the severity of the economic disaster. Another speculation is that the financial crisis, by the very nature is a much slower and more difficult recovery. A recession is generally defined as a decline in GDP growth in a six-month period. So what can keep the GDP, or the value of all consumed goods, from returning to a healthy economic state? Oil is a primary source of energy we use everyday. The more oil we use, the faster the economy grows. Over the last forty years, a 1 percent hit to the world oil consumption has led to a 2 percent increase in GDP. That means if GDP increased 4 percent a year, like before 2008, oil consumption was increasing by 2 percent a year (Anandan, Ramaswamy, and Sridhar). Statistically, in 2006 figures display that the average oil price was $67.65 per barrel. In 2008 when the recession hit, the average oil price was...
Words: 947 - Pages: 4
...The Recent Recession Joanne Cartier Mr. Fant ECO 100 March 15, 2013 A recession is defined as a decline in a country’s GDP (gross domestic product) or when the economic growth in negative, two or more consecutive quarters. The state of the economy during the most recent recession was the worst since the Great Depression. In 2008-2009, the economy decreased within five quarters, including four quarters consecutively. Two quarters showed a decrease more than 5% and Q2 in 2008 dropped 8.9%. This was the lowest drop in a recession since the Great Depression. In Q3 2009, the recent recession ended, because of economic stimulus spending. The recent recession was the longest since the Depression, lasting 18 months. The recession officially started in late 2007 to mid-2009. The Economic Security Index determined the impact of the recession by developing a measurement tool based on government economic data. The tool showed that due to the decline in income, increase in medical spending or both, Americans experienced a financial loss of 25 percent or greater. Southern states showed the worst economic losses from 2008-2010. Researchers found various reasons linked to these states hardship such as, poverty rates, the amount college graduates and unemployment rates. During the last recession, the national unemployment rate was at 5.0 percent making it the lowest in 2.5 years. From December 2007- June 2009, employment decline was the greatest of any recession of recent...
Words: 1614 - Pages: 7
...1. In your team’s opinion, have we recovered from the economic recession based on the economic video? Site the indicators related to your opinion. As of 2015, the U.S. is now expanding six years into recovery after the “Great Recession” of 2008-2009. Today’s current economy is in better condition than previous years based on evaluating GDP and labor markets on a national sense, but there is still much room for improvement even as the economy approaches the 100% mark from what it had lost. Consumers comprise about 70% of the economy and their households were heavily impacted on capital spending and employment conditions. Their spending was cut back immensely when the recession occurred, but in recent years consumers have steadily felt more comfortable getting back into the market. The growth is apparent but the amount they are spending has not yet matched to how it was pre-recession. Additionally, households are still recovering from a weak financial portfolio, with many only claiming their house as their largest asset value. The business sector also shows accelerated progress towards nearing full recovery, as companies are increasing investments and expenditures with more consumers back on the market. Industries across the board are adding about an average of 200,000 jobs per month, which has helped recuperate the high unemployment rates in the years after the recession. But this indicator signals that unemployment rates are close, but not yet back to normalcy because...
Words: 399 - Pages: 2
...recover from the recession and to prosper, the government needs to intervene and implement some policies to ensure that these factors are well taken care of. Also, getting the confidence of people and the businesses on the country's economy is key to Thailand’s...
Words: 1061 - Pages: 5
...Indicators The definition of the terminology ‘Business Cycle’ can be defined aS the recurring and fluctuating levels that an economy can experiences over a period of time. There are certain stages of a business cycle and they are; growth, peak, recession and recovery, A GDP (gross domestic product) is an indicator that shows how much is being made in the UK. The GDP measure the level of economic activity in a particular country. Berendsen PLC This is a public limited company which has branches around 15 different countries in Europe and the business employs more than 16,000 employees and the headquarters is based in London. Berendsen PLC is a business organisation which focused on textile services and they have the leading position in most of the countries that they operate in. The business also provides service solutions to source, clean and maintain the textiles that our customers need to keep their operations running. Berendsen PLC is organised in three main different business lines and these are; work wear, facility and linen. Stages Of Business Cycle The stages of business will be listed and explained below and the impact of it on Berendsen will also be explained. These are as follows: * Boom * Slow down * Recession * Recovery Boom: The definition of boom refers to a rising financial market. Another term for a ‘boom’ would be bull market. During a stock market boom the majority of stock rise in price and there is often a euphoric feeling about...
Words: 1001 - Pages: 5
...1 Strength of the Recovery 2 Developed Countries: 2 Emerging Markets: 2 Risks to the Global Economy 3 Exit Strategy from Policy Stimulus 4 Repair and reform of the financial sector 4 Fiscal Crises and underinvestment in Infrastructure 4 Socio and Political Implications of Unemployment and Private Demand 5 Asset Price Collapse and the risk appetite of investors 5 Return to Previous Growth Path or Not 5 Will the current crises be “DÉJÀ VU ‘” for the world wide economy? 6 Fundamental Changes in Origins & Nature of Economic Activity 6 Global warming / Climate Change: 7 Population Growth: 7 Power shift to the east: 7 Innovation: 7 Economic Activity: 7 Impact of Global Crisis on South Africa’s Growth Outlook 8 Conclusion 8 BIBLIOGRAPHY: 10 STRENGTH OF THE RECOVERY All of the world’s high-income countries returned to positive real GDP growth during the fourth quarter of 2009 and the Economist Intelligence Unit’s forecasts for 2010 indicate a return to marginally below the growth trajectory that was achieved prior to the recession. Developed Countries: UNITED STATES Economic recovery in the US has been remarkably strong, with fourth quarter real GDP growth of almost 6% suggesting the presence of a “V”-shaped trend. Further, news emanating from recently published official data includes a recovery of private sector investment in capital formation, particularly on information technology software and machinery & equipment. A recovery of growth in labour markets...
Words: 3282 - Pages: 14
...The Automotive Industry Recovery Prepared for: Transmittal Letter TO: FROM: DATE: SUBJECT: Report Overview The following report discusses the automotive industry recover from the “Great Recession” that occurred in 2008/2009. Information presented will be the state of the automotive industry before the recession, after the recession, how the industry is doing now and how the future looks for automakers. Contents The Automotive Industry Recovery 1 Transmittal Letter ii Contents iii Figures iii Executive Summary iv Introduction 1 Finding 1 Pre-Recession 1 Post Recession 2 How is it now? 3 The Future Outlook 3 Analysis 3 Summary 3 Conclusions 4 Reference 5 Figures Figure 1, Annual Auto Sales in the U.S. 2 Executive Summary The Automotive Industry was hit hard by the “Great Recession”. Jobs and sales declined rapidly as the economy and Americans were coming up short financially. After a couple years and some restructuring the automotive industry started making a comeback. Increasing sales by focusing on consumer needs helped bring workers back to work. Now the industry is booming again with continued growth in the future. The Automotive Industry Recovery INTRODUCTION PURPOSE The nationwide effect from the Great Recession on the auto industry was apparent everywhere. With the bail-outs of some of the big auto makers and loss of jobs, the economy really went into a slump...
Words: 1111 - Pages: 5
...within the two different economic environments. Explain how this effects companies and customers. What is the challenge for Jaguar How the factors might listed on the left impact Jaguar or part of Jaguar? What might Jaguar do to respond to these changes? GDP Growth – Economic growth is an increase During growth the GDP is at increase in the transaction and more demand which means more people are doing trade. More money in the economy results in more goods being produced and manufactured in the economy. As a result the economy expands in value. This leads to a reduction in unemployment since extra occupations are made accessible. This grow in jobs shows how more people can have more disposal incomes due to the increase of jobs. Recovery: during recovery the GDP unemployment is a major point which results in disposal incomes decreasing so as the economy recovers more jobs are created so unemployment will start to fall. The unemployment means that the output of the economy will decrease meaning the supply will decrease. e.g. Spending less – decrease in disposable income / less employment / less supply / When a country is going through a growth stage, they usually tends to have a high GDP. This is when jaguar finds it to be the most beneficial to them as there is a high demand on their cars and their customers are in a process of increasing, this is when the curve shifts to the right because of the supply and demands. Jaguar...
Words: 596 - Pages: 3
