Recession as explained by private sector Recession as defined in Macro- economics.
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Transcript of Recession as explained by private sector Recession as defined in Macro- economics.
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R a j a H a s a n K h a n G r a d e X I
A p r i l 2 9 ’ 2 0 2 2
The City School
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Various definitions of Recession
• Recession as explained by private sector
• Recession as defined in Macro-economics
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RECESSION
WHEN YOUR NEIGHBOUR LOSES HIS JOB
A joke that economists quote to explain theDifference between “Recession & Depression”
DEPRESSION
WHEN YOU LOSE YOUR JOB
RECESSION AND DEPRESSION
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Producer wants his demand to be high
Actually, Demand is the price at which consumer is ready to buy andproducer is ready to sell;
FACTORS AFFECTING MARKET“DEMAND & SUPPLY”
Producer Price
Consumer Price
Demand = QuantityBut, here Demand = Price; This is because, Price decides the Quantity of Sales;Competitive Price = More Demand;Incompetitive Price = Less Demand;
Consumer wants his buying cost to be low
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People buying less stuff
Decrease in factory
production
Growing unemployment
Slump in personal income
An unhealthy stock market
What happens in Recession
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Currency Crisis
Energy Crisis
Liquidity Crisis
Overproduction
Inflation
CAUSES OF RECESSION
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The Impact of Recession on Employment
The impact of recession is unpredictable and depends entirely on the nature of the recession.
The lessons learned on past recessions have somehow helped us trace the patterns and have given us ideas on how to solve the problem.
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However there are Benefits of Recession too!
It slows down the rate of inflation
Lowers interest rates
Gives chance for a better and more planned start
More competition if many large companies survive
Can lead to a more prosperous economy
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It is unhealthy for any nation to be in Recession; So, Government will take certain countermeasures to eliminate or reduce the Effect of recession for turnaround; Important Point:
Today, it is a market Economy
Producers;Can produce and sell at their prices
Consumers;Can decide to
buy or not;
Both Producers and Consumers are free to act; Not a forced action
How to come out of recession?
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Government has 2 plans
Fiscal Policies(By Govt.)
Monetary Policies(By SBP)
Hence, Government does not have direct control on Producers’ & theConsumers’ behavior; But, they can influence millions of Producers & Consumers with Government’s policies;
Government influences the economy by changing howit (Government) spends and collects money
SBP manipulates the available supply of money in the country
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Government influences the economy by changing how it (Government) spends and collects money
1] Tax cuts for businesses or for individuals
More moneyavailable forspending
Demand picksup; Market can recover;
2] More Spending by Govt. to create jobs
Individuals getsalary and spendmoney
3] Automatic fiscal policy; Unemployment Insurance
Some income tounemployed people to spend
Fiscal Policies
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1] Reduce reserve ratio
More moneyavailable for bankto give loans
More DisposableIncome;Demand Rises;Market rescued
2] Lower the interest rates
Individuals takemore loan
Government manipulates the available supply of money in the country
MonetaryPolicies
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