Economic downturns may be normal occurrence but it does not mean that
it can't hurt you. In Economics, recession refers to the period in a
country's economy when there is slowing down of progress and rising
inflation rates. Like a cycle, a country's economy is sometimes up and
sometimes down. We just don’t notice it before because the economy
oftentimes bounces back fast. It is only now that recovery seems so slow
and damage has become far-reaching with the crashes in the real estate
industry as well as to the banking and insurance sectors.
So what makes an economic recession? What do you need to know about it and what is it all about?
1. Cost of Living Increases
Because of the slowing down of the economy, production will not be as active. This stems from the lesser demand that comes from the consumers. When this occurs, prices will almost always rise as there will be lesser products in the market than before. Basic commodities will usually increase in cost, especially those that people consider as basic necessities such as food, shelter and home. Frequently, what you will normally be able to buy for a specific amount money won't be as much. This is when we say that the value of the money has lessened (inflation). The solution to this universal problem it to do the obvious and cut back and try to spread out or avoid large expenditures. With almost everyone on same plan, it intensifies the original problem (recession), but the economy will eventually stabilize.
2. Job Cuts
During recession, many companies will suffer from cash flow problems. Because of the lesser demand, more and more companies will shut down their production lines to cut costs. This leads to cutting off jobs just to make both ends meet. Right now, many companies in the United States have already done job cuts. Although it does not sound good, these companies do not really have a choice as often, they will need to let go of some employees to keep the company running and still employ the others.
3. Cutting Expenses
Because people do not have much money in their pockets, most of them will be scrimping on their expenses. They will only buy things that they need. Some do this because they want to save their money while others do this because they don’t really have a choice, having a much lower income than before. This however contributes to the economic recession as low demand will also lead to low supply which can affect company earnings. When this happens, jobs may become at risk and companies may suffer from financial losses.
4. Political Turmoil
Although it is not often the case, most countries suffering from economic recession will have political turmoil. This is especially true if the country has not responded to the economic recession well and the situation has ballooned 10 times over. When this happens, people will naturally blame the people in the government and their policies. This is the time when people troop to the streets to protest or they announce their displeasure through surveys on job approval ratings of government officials.
5. Tax Cuts
Because of lesser income and less value for your money, the government tries to augment people's financial problems and also to help companies by giving people more money that they can spend on basic goods. They do this by giving back to their people a portion of their income—tax cuts.
In this instance, the government is cutting off the income that they get from people in order to stabilize the economy during economic recession.
So what makes an economic recession? What do you need to know about it and what is it all about?
1. Cost of Living Increases
Because of the slowing down of the economy, production will not be as active. This stems from the lesser demand that comes from the consumers. When this occurs, prices will almost always rise as there will be lesser products in the market than before. Basic commodities will usually increase in cost, especially those that people consider as basic necessities such as food, shelter and home. Frequently, what you will normally be able to buy for a specific amount money won't be as much. This is when we say that the value of the money has lessened (inflation). The solution to this universal problem it to do the obvious and cut back and try to spread out or avoid large expenditures. With almost everyone on same plan, it intensifies the original problem (recession), but the economy will eventually stabilize.
2. Job Cuts
During recession, many companies will suffer from cash flow problems. Because of the lesser demand, more and more companies will shut down their production lines to cut costs. This leads to cutting off jobs just to make both ends meet. Right now, many companies in the United States have already done job cuts. Although it does not sound good, these companies do not really have a choice as often, they will need to let go of some employees to keep the company running and still employ the others.
3. Cutting Expenses
Because people do not have much money in their pockets, most of them will be scrimping on their expenses. They will only buy things that they need. Some do this because they want to save their money while others do this because they don’t really have a choice, having a much lower income than before. This however contributes to the economic recession as low demand will also lead to low supply which can affect company earnings. When this happens, jobs may become at risk and companies may suffer from financial losses.
4. Political Turmoil
Although it is not often the case, most countries suffering from economic recession will have political turmoil. This is especially true if the country has not responded to the economic recession well and the situation has ballooned 10 times over. When this happens, people will naturally blame the people in the government and their policies. This is the time when people troop to the streets to protest or they announce their displeasure through surveys on job approval ratings of government officials.
5. Tax Cuts
Because of lesser income and less value for your money, the government tries to augment people's financial problems and also to help companies by giving people more money that they can spend on basic goods. They do this by giving back to their people a portion of their income—tax cuts.
In this instance, the government is cutting off the income that they get from people in order to stabilize the economy during economic recession.
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