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Thursday, February 24, 2011

Economic Recession

Introduction

In the event where there is a presence of economic recession, the countries are incredibly in the state of panicky. The developed countries are doing everything just to avoid the impact of the recession in their land, but in truth, the developed countries are the first target of the economic recession because of the economic downturn. The simple explanation is through the exploration of different principles of economics, when a country played a great role in the international market and in different organizations, it is obvious that the impact will fall on their territory.

Empirical Study on Impacts of Recession

One of the strong economies is the United States and in the appearance of recession in their different industry, the leaders and different business analysts can’t navigate their sale to avoid the tempest of the recession. They find it hard to adjust because of the other necessities which are actually not belonged in the basic commodity such as cars. On the other hand, the less developed countries and/or developing countries can adjust to the impact. They can also feel the effect but not that heavy burden. This is because, since their economy is not that stable, they can easily find the important commodities and then focus on controlling the other economic factors. Unlike the stable economies, the decision is hard to dig. In addition, the less-developing countries already feel they our typical kind of recession even before the appearance of the global economic recession.

What is the Economic Recession?

When talking about the recession, the economists can easily define it as the economic downturn or depression. Just like the depression that a person feels, the different economic rates hits down. The leaders’ scrutinizes the impact of recession in the economy and managed to fix the different affairs such as investment before their wealth is saturated. But in the event when the leaders already invested in the country that currently on the hardship in economic downturn the negative connotations are following the word “recession”.

The recession affects the fluctuation in the business and in the stick market. The gold reserves of different countries are also affected. The periods of economic growth which is characterized by expansion are also infected by the recession. Because of the different economic activity where the economy usually reaches the peak, the recession made it possible to decline. Recessions made the economy lose its confidences in the competition in the global market. Recession affects the real gross domestic product or GDP growth of the country and the declination in different economic activities are experiencing the declination (Smith, 2009). The business cycle and employment is also affect that leads to the classification of the poor in the poverty rate. As a domino effect, the inflation in different products most especially in oil, gas and petroleum are affected due to the external economic problem the prevailing in the market.

Significance in Studying the Recession: The Roots and The Impacts

It is important to understand the impacts or effects of economic recession so that the country can be prepared. They will be prepared and avoiding the different economic decisions that play in the area of policies. Different policy errors lead to the creation of the internal economic recession or economic downturn. These policies include the fiscal and monetary policies that affect the flow of the currency and the trading industry. Another mistake can be in supply shocks such as in oil which needs to be imported in other country. The financial status of the businesses and individuals are also affected such as their investments, savings, and consumptions (Labonte and Makinen, 2002; Latham and Braun, 2009).

This recession is sometimes abused by the monopolized industry through the activity called hoarding or the act in which they keep the goods and sell it in the time when the inflation hits the market. In the appearance of economic recession in the country, economists form the less developed countries are sometimes because this might be the reason in the incredible growth of the poverty rate. Meanwhile, the developed economies of the countries such as in United States are acting differently. The people are selling their things on which they though that are unnecessary. Their action implies two opposing views. First it is good to survive and second it is a problem when the recession is over and they want their things back.

Conclusion

Recession is a broad concept of economic affairs. It affects the lives of the citizens and the performances of the businesses in the international market. Recession, although negative, teaches the people on the importance of thinking the future. Definitely, the recession is a storm that every economy should endure but because of having the idea on how to battle it, the people such as the economists and the business leaders can create a solution to minimize its effect onto their business or industry, and as well as in the entire country.

References:

Labonte, M., & Makinen, G., 2002. The Current Economic Recession: How Long, How Deep, and how Different From the Past? CRS Report for Congress [Online] Available at: http://www.fpc.state.gov/documents/organization/7962.pdf [Accessed 18 Feb 2010].

Latham, S., & Braun, M., 2009. Assessing the Relationship between Financial Slack and Company Performance during an Economic Recession: an Empirical Study, International Journal of Management, Vol. 26, No. 1.

Smith, D., 2009. What is a Recession? Liber8 Economic Information Newsletter [Online] Available at: http://liber8.stlouisfed.org/newsletter/2009/200902.pdf [Accessed 18 Feb 2010].

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