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    Submitted by Birabrata Chakraborty

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    bir3519
    The document discusses the causes and indicators of an economic recession. It defines a recession as two consecutive quarters of declining GDP. It then explains that in the US, a boom in housing and consumer spending fueled by easy access to loans led to a bubble. When many consumers defaulted on subprime loans, banks suffered losses and tightened credit, reducing spending and demand across other industries and tipping the economy into recession. Key indicators of a recession include decreased consumer spending, factory production, income and employment as well as a struggling stock market.

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    Submitted by Birabrata Chakraborty

    Uploaded by

    bir3519
    4 views7 pages
    The document discusses the causes and indicators of an economic recession. It defines a recession as two consecutive quarters of declining GDP. It then explains that in the US, a boom in housing and consumer spending fueled by easy access to loans led to a bubble. When many consumers defaulted on subprime loans, banks suffered losses and tightened credit, reducing spending and demand across other industries and tipping the economy into recession. Key indicators of a recession include decreased consumer spending, factory production, income and employment as well as a struggling stock market.

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    American Recession

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    The document discusses the causes and indicators of an economic recession. It defines a recession as two consecutive quarters of declining GDP. It then explains that in the US, a boom in housing and consumer spending fueled by easy access to loans led to a bubble. When many consumers defaulted on subprime loans, banks suffered losses and tightened credit, reducing spending and demand across other industries and tipping the economy into recession. Key indicators of a recession include decreased consumer spending, factory production, income and employment as well as a struggling stock market.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    4 views7 pages

    Submitted by Birabrata Chakraborty

    Uploaded by

    bir3519
    The document discusses the causes and indicators of an economic recession. It defines a recession as two consecutive quarters of declining GDP. It then explains that in the US, a boom in housing and consumer spending fueled by easy access to loans led to a bubble. When many consumers defaulted on subprime loans, banks suffered losses and tightened credit, reducing spending and demand across other industries and tipping the economy into recession. Key indicators of a recession include decreased consumer spending, factory production, income and employment as well as a struggling stock market.

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    Submitted By

    Birabrata Chakraborty
    C] What is Recession?

    Recession is the economy shrinking for two


    consecutive quarters (=6 months) with a
    decrease in the GDP (=Gross Domestic Product)

    GDP = Value of all the reported goods and services


    produced by the people operating in the country

    GDP = MONEY VALUE OF {C + I + G + (X – M)}

    C = Consumables, I = Gross Investments, G = Government Spending,


    X = Exports, M = Imports
    Cause of Recession ?
    America in recent trends, experienced a rising economy
    leading to people thinking about good times, which lead
    to
    People Buying More Things like Homes, Cars, etc due to “Feel Good” factor

    This leads to Boom in Market Sectors Like Housing, Home Products, etc

    Banks and Finicial Institutions Offer Attractive Loans to Attract Such Consumers and
    Sub-Prima Consumers , i.e Lower to Middle class Consumers
    Reported cause : Real Estate and Inflation due to it

    People buy home on Loans Due to Rising Real Estate

    Finicial Institutions and Banks complete,for consumers

    This gives Rise to giving Loans to Defaulting Consumers

    Banks take over homes of defaulters and try to sell them

    But Banks have to sell homes at loss,due to low prices

    Due to This,Banks go into loss,leading to a finicial crunch

    Banks and Institutions create loans to save from


    CONTINUED
    Bankrupcy
    IN NEXT SLIDE
    Reported cause : Real Estate and Inflation due to it

    Banks and Finicial Institutions started “Cost Reduction” activities

    iii] Salary reduction to


    i] Reduce Mortage rates ii] Lay off people
    “Not laid off people”

    People still unable to Low or No income to They became careful due


    Pay EMI’s spend and buy goods to the fear of loss of job

    This tightens Finicial Demand for other goods Started saving money
    Crunch in Banks & Institutions come down instead of spending

    To escape bankruptcy,Banks Demand for other goods


    lays off people come down
    So, you can see how the hit on Banks and Finicial
    institutions can affect “Un-related” industries
    in the end;

    One industry can hit many other industries when the


    confidence level of millions of consumers & producers
    drastically comes down;
    F] How to know recession?

    Indicators to say a nation is in recession;

    - People buying less stuff


    - Decrease in factory production
    - Growing unemployment
    - Slump in personal income
    - An unhealthy stock market

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