...any regard to his or her creditworthiness. This was brought about by the “Spend yourself out of the post dot com bust recession” policy of the American government at that time. The end result of the Sub-prime crisis is manifesting itself in myriad ways. There are direct and indirect implications not only for the United States but for the entire world. The Sub-prime that was brought upon by the American financial system upon itself is spreading its tentacles around the world. People who were not even remotely connected with the Sub-prime crisis are being adversely affected. National Bureau of Economic Research (NBER) National Bureau of Economic Research (NBER) is the official agency in charge of declaring that the economy is in a state of recession. They define recession as: “significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”. BUSINESS CYCLE The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic activity over several months or years. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession). Business cycles are usually measured by...
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...Economic Recession: Causes and Effects Student’s Name University Affiliation Economic Recession: Causes and Effects An economic recession is a slowdown in economic activities such as employment, distribution, production, real income and real GDP. The 2008-2009 economic recession was the longest in duration and deepest in contraction since the great depression of 1929-1932, (Roberts, 2009). Its causes were mainly preventable through a series of legislations and so it can be avoided in the future. This paper champions the thesis that the recent economic recession was largely avoidable, but the application of inappropriate economic strategies as presented below caused its occurrence, and has so far had overarching effects on the world. According to (Simpson, 2009), the recession was the direct and unavoidable result of the credit boom that preceded it. First, the credit boom was partly a result of low interest rates that lasted too long, facilitated by governments and their central banks. This resulted in the build-up of a credit bubble. Secondly, governments failed in the role of regulating the credit market. This encouraged borrowing of those who were least able to repay, resulting in an increase in demand of properties, (Bessler, Leatham and Zhang, 2006). Once demand had risen, property prices went up, attracting more investors into the market. Then the desire for profit was overtaken by the fear of loss as the market was flooded with...
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...In 2008, the U.S. Economy experienced a drop in the stock market so fast and unexpected that it has been called the “Great Recession” (Santucci, 2011) and the “Crash of 2008” (Crash of 2008, 2010). Many things contributed to the recession, but the main cause was sub-prime lending by banks. Basically banks were lending money to people to buy homes that they couldn't afford. Due to the sub-prime mortgages going belly-up, along with the spiraling effects of bank failures such as the automotive industry needing to borrow billions of dollars, the U.S. Economy experienced is worst economic situations since the Great Depression. The causes of the recession date back many years, and as far back as 1980. This is when bank deregulation begins (Crash of 2008, 2010), which means less qualifications are needed to give out a loan. This recession could have been foreseen by some since in 1987, there was a stock market crash that occurred after the banking deregulation began (Crash of 2008, 2010). As we get closer to the Crash of 2008, we find that there are more and more subtle signs. One of the biggest early signs was in 2001 when the annual issue of US mortgage backed bonds increased from $500- $2,000 billion (Crash of 2008, 2010). Also, with the U.S. Backing more bonds at such a high rate and causing the interest rates at an all time low, from 2001 to the third quarter in 2006, the average house value was raised by 80% (Crash of 2008, 2010). After this time, the housing market experienced...
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...essay will explain how economists establish if the economy of a country is in recession or not. The essay will also analyse and review various policy tools that are often used by the government to guard against recession or to reduce the impacts of recession on the economy and the people. The essay will be divided into two parts. In the first part, the meaning of recession will be provided and why recession can be considered as an economic problem will be explained. Also, the first part will explain how the strength and depth of recession can be measured. The second part of this essay will explain various economic policy tools that government often use to make sure that economy of a country grows. Part 1 Recession is defined as a condition whereby a country experiences temporary economic decline, during which time the trade and industrial activities in the country are reduced; and the Gross Domestic Product (GDP) of the country fall in two successive quarters (Arnold, 2014). A recession can also be said to have occurred if there is a big reduction in the economic activity of a country, and this last longer than few months (Arnold, 2014). When there is a recession in a country, there will be a fall in the country’s industrial production, employment, real income and wholesale –retail trade (Arnold, 2014). This means that recession often has negative effects on the economy of a country and that recession can lead to unemployment for people and lack of profits for businesses (Arnold...
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...Expansionary Economic Policy Clinton Dullin Eco203: Principles of Macroeconomics Evelyn Carlson 9/1/02014 The government in times of economic recession has responsibility to take action, engaging in expansionary economic policies is the action my paper will discuss. The types of economic expansion include Fiscal Policy, and Monetary Policy, the expansion of the two policies allows the government to adjust taxes, and government spending. Harry Truman once quoted “It’s a recession when your neighbor loses his job: it’s a depression when you lose yours.” (The economy perspective, the banker's banker. (1998, Jul 29). When recession hits the first party that is blamed is the government, so there ability to take action is a sign of them taking responsibility. Government action is necessary to right the recession ship, expanding Fiscal, and Monetary Policy may very well be the answer. The first topic of discussion is Expansionary Fiscal Policy and how the government uses the policy to affect the economy. Expansionary Fiscal Policy is a type of policy which includes increase in government purchases, a supple decline in taxes, while making an increase in transfer payments. These changes are designed to close the recessionary gap, while increasing economic stimulus packages and they aim to decrease unemployment. The government will introduce Expansionary Fiscal Policy during anticipation of contractions in the business-cycle. Increase in government spending will increase...
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...Inflation and unemployment were not improved by monetary policy Abstract The global financial crisis made a long term negative effect on the economy all over the world as well as New Zealand. GDP and inflation decreased with a high level of unemployment rate. This essay is going to discuss the effect of the actions from reserve bank. According to their response, the IS-LM, AD-AS and Phillips models will be used to analyze the effect of change in OCR on economic activities. Furthermore, some previous literature will be used in this essay which is relative to some problem happened during the recession. Introduction There is a big impact on the economic environment following the 2008 financial crisis. New Zealand faced a negative effect on unemployment rate, income, inflation and output and etc. as an important part of developed country. The main aim of this essay is to investigate what monetary policy has been used in response to the recession and whether it is useful to make a significant recovery. The financial crisis can be seen as a very serious problem in New Zealand. The stock market got hit seriously because the investment, income, confidence, employment rate etc. all fall. During the recession, the unemployment rate rose from a low of 3.5% in December of 2008 to a high level of 7.3% in June of 2012. (TRADING ECONOMICS, 2013) The New Zealand GDP had a negative growth during 2008 and 2010 because many businesses shut down and the unemployment rate increased...
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...Recession is a particularly emotion-provoking word, especially considering that it has enveloped far too much of the economic climate over the past decade and a half. Whether is was the swift and absolute burst of the dot-com bubble or the implosion of the housing market, recessions have presented unique and troublesome economic times that have destroyed trillions of dollars or wealth and struck fear in business, consumers, and pretty much everyone that falls between the “1%” and those living below the poverty line. Recessions, by definition, are periods negative GDP growth that have occurred over at least two consecutive quarters. Recessions have been studied, analyzed, and written about from virtually every angle in everyone’s quest to identify and prevent future ones. One the more intriguing aspects of recession analysis is a look at how businesses choose to invest at the beginning of an economic recession given the history of the government promoting investment incentives or investment credits. In order to examine how a firm may act in anticipation of business investment, friendly policy it’s vital that we examine how they have acted when these policies have been enacted and legislated during past recessions. During The Great Recession of 2007-early 2009, pro-business investment stimulus measures were enacted to increase loss carry backs and additional incentives for firms making investment in these times of extreme uncertainty. Each economic measure taken in the wake of...
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...In 2008 was the Great Depression, this was the last time the United States had a recession. This was the worst recession since the Depression in 1929. This recession was the longest lasting recession, a total of 18 months. "It was caused by the Y2K scare, which created a boom and subsequent bust in Internet businesses" (How the 9/11). This recession lead into the country’s financial crisis. Financially, businesses collapsed. This was a huge meltdown for the United States, we called this recession the “Great Recession”, it affected each and everyone so quickly. As a country recessions are hurtful to the economy. Recessions are identified as a decline in activities dealing with the economy. Citizens across the country were affected tremendously....
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... This essay will walk through the processes of starting a retail business venture in the high street and discuss how the economy and the marketing mix directly effects each step. To do this it will be vital to explore the current economic climate and what a poor economic climate means? A definition of a poor economic climate “a recession is a decline in growth, domestic product for two consecutive quarters and a depression as a prolonged recession resulting in falling prices, reduced purchasing power, excess in supply, unemployment, and a general reduction in business activity” (Downes,j.,& Goodman,J.E.(1995).Dictionary of finance and investment terms Hauppage,nj:Barron’s educational series) This has been the case for the UK since 2007 as we are in what is known as a double dip recession narrowly escaping a triple dip recession. (BBC News 2013, http://www.bbc.co.uk/news/business-22290407) This downturn indicates that the UK is indeed suffering from a poor economic climate having the effect of less spending and so less trade occurring in the local, regional, continental, or global marketplace. How this relates to a start up venture in the high street has both negative and positive effects. To look at each of these effects it is best to look at the entire process of starting a new company and the effects upon the marketing mix and explain its importance. Extended version includes – (People, process...
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...Abstract This paper analyzes the demand of Information Technology during different market conditions. This paper discusses the role of IT and its significance in the current world. It also discusses various market conditions that prevailed over the last few decades and their impact on IT. This paper mainly focuses on the recent recession and how is IT impacted and transformed during these conditions. Having discussed the history of IT in different market situations, this paper throws a light on future conditions and growth in the field of IT. DEMAND ANALYSIS OF IT IN DIFFERENT MARKET CONDITIONS Introduction Demand is an economic principle that tells us about consumers' want, readiness and their capability to pay a price for a specific good or service. It is a common belief that greater the demand, greater is the price of a good or service. But, what leads to the demand of a particular good/service is a complex analysis and is different for each good/service. Any business, before development or expansion, studies the demand for its product. This study of demand is a complex process. Based on this demand analysis report, a firm leadership would decide on extension or starting of the business. The demand analysis might help determine or justify a desire for expansion in a particular sector or just to assess the health of a particular sector. Even though the demand analysis procedure is performed differently based on the type of business or study, participants...
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...IMPACT OF GLOBAL RECESSION ON READY MADE GARMENTS INDUSTRY OF BANGLADESH IMPACT OF GLOBAL RECESSION ON READY MADE GARMENTS INDUSTRY OF BANGLADESH Prepared for: Dr. Muhammad Ziaulhaq Mamun Course Instructor Research Method (K301) Prepared by: Nabeel Khan (ZR-29) Farwah Tasnim (ZR-40) Rasheeq Rayhan (ZR-45) Sayan Muhammad Rafi (ZR-48) Rafat Shamim (ZR-51) Ishmam Rahman Abedin (ZR-53) Bushra Barkat (ZR-54) Institute of Business Administration University of Dhaka June 30, 2012 30 June 2012 Dr. Muhammad Ziaulhaq Mamun Professor Institute Of Business Administration University Of Dhaka Dear Sir, Here we present the report “Impact of Global Recession on Ready Made Garments Industry of Bangladesh”. In this report we tried to analyze the current RMG industry scenario and the various factors associated with it which have been influenced by the global financial crisis. We believe our report will facilitate strategic planning for both the decision makers in the market and identify possible counter measures and new possibilities. We hope the report meets your expectations. We will be glad to answer any query about the report. Sincerely yours, Nabeel Khan (ZR-29) Farwah Tasnim (ZR-40) Rasheeq...
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...have caused the great depression among them are bank failure, Stock Market Crash of 1929, Reduction in Purchasing Across the Board, American Economic Policy with Europe, Drought Conditions but many people believe that it’s the American economic policies that really caused the depression and entirely blame the government for that. Some of the effects are increase in unemployment, collapse of banks and increase in the cost of living. On the other hand the economic recession of 2008 was longest recession since the world war two hence the term great recession. The recession lasted for 18 months from December 2007 to June 2009. Various things have been attributed to have cause the recession among them are irrational excitement in the housing market and low interest rates while some of the effects are increase in unemployment, increase in oil prices, decrease in consumption and investment. Recessions are declared by the national bureau of economics research (NBER) and according to NBER are defined as ‘‘significant decline in economic activity spread across the economy, lasting more than a few months” but according to John Perkins (2008) recession is any period of two or more quarters of negative...
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...2008 GREAT RECESSION COMPANIES WHO SURVIVED AND ALTERNATE METHODS TO EMPLOYEE LAYOFFS MGT 310-06 PROFESSOR CAS CASWELL BY DE’-LISA BARNES INTRODUCTION In 2008, the end of the first decade of the 21st century, the world market experienced the worst economic decline, known as the Great Recession. The overall impact was described as being the worst global recession since World War II. The precise magnitude and timing of the recession is widely debated and varied from country to country. The years leading up to the crisis were characterized by a highly excessive rise in asset prices, combined with a boom in economic demand, which inflicted a clear hardship for businesses and families. To further explain my research, this paper will focus on the following: What caused the great recession, Effects of the recent recession, Types of Businesses that survived the recession, Companies that hired during the recession, Companies that choose shared-worked programs over layoffs, Various states that participates in the work shared programs, and the Advantages of the work share program. WHAT CAUSED THE GREAT RECESSION The Great Recession actually began in December 2007, which is long before most people ever realized what was to soon transpire. Although there are many speculated factors or causes that led to the recession, the American people strongly believe that the following groups are responsible for the Great Recession of 2008: Government, Mortgage Companies, Banking...
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...CHAPTER 2 THE AGGREGATE SUPPLY - AGGREGATE DEMAND MODEL The first formal macroeconomics model introduced by the text is called the Aggregate Supply - Aggregate Demand Model, which will hereafter be referred to as the AS/AD model. The AS/AD model is useful for evaluating factors and conditions which effect the level of Real Gross Domestic Product (GDP adjusted for inflation) and the level of inflation. The model is an aggregation of the elementary microeconomic supply-and-demand model discussed in the previous chapter. Like the microeconomic model, the AS/AD model is a comparative statics model. The model's insights, therefore, are obtained by identifying and initial equilibrium condition, then "shocking" the model by charging one or more of the parameters, then evaluating the resulting new equilibrium. Introduction to the Aggregate Supply/Aggregate Demand Model Now that the structure and use of a basic supply-and-demand model has been reviewed, it is time to introduce the Aggregate Supply - Aggregate Demand (AS/AD) model. This model is a mere aggregation of the microeconomic model. Instead of the quantity of output of a single industry, this model represents the quantity of output of an entire economy (or, in other words, national production). Refer to Figure 2.1 for an example of the AS/AD model. As can be seen, two variables are represented by the model. The quantity variable on the horizontal axis is now represented by real gross domestic product (Y)...
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...Question 1 Introduction In economics there are two main schools of thought; these schools differ in their belief of what policies are best suited to attain full employment in the economy. Keynesians tend to favour demand side policies and are more prone to intervene in the market and therefore prefer to use fiscal policy whilst monetarists believe adjustments in money supply is more appropriate in stabilising the market ,therefore preferring monetary policy. In this question I will discuss the views of Keynesians and monetarists regarding the effectiveness of monetary and fiscal policies in controlling aggregate demand through the IS-LM framework. I will first provide a brief description of the curves explaining their formation and what they represent and then I will go on to examine monetary and fiscal policy within the IS-LM framework. Finally, I will examine the views of monetarist and Keynesians regarding the effectiveness of both policies in raising the level of national l income and also consider the extreme cases. The IS-LM model was initially developed by John Hicks in 1937 but was made popular in 1949 by Hansen in order ‘to provide a framework for analysing the factors determining the level of aggregate demand’. The IS-LM model is a short run model of the determination of output. It shows the unique combination of income and interest rates that lead to an equilibrium in both the goods and money market at the same time (Begg, 2008). The IS-LM model is presented...
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