Recession as explained by private sector Recession as defined in Macro- economics.

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

Various definitions of Recession

• Recession as explained by private sector

• Recession as defined in Macro-economics

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

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

People buying less stuff

Decrease in factory

production

Growing unemployment

Slump in personal income

An unhealthy stock market

What happens in Recession

Currency Crisis

Energy Crisis

Liquidity Crisis

Overproduction

Inflation

CAUSES OF RECESSION

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.

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

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?

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

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

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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