abhishreshthaa
Abhijeet S
check out here are some CAUSES OF RECESSION AND THEIR EFFECTS..
Causes of recessions
Currency crisis
A currency crisis, which is also called a balance-of-payments crisis, occurs when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange or a store of value. It is a type of financial crisis and is often associated with a real economic crisis.
Energy crisis
An energy crisis is any great bottleneck (or price rise) in the supply of energy resources to an economy. It usually refers to the shortage of oil and additionally to electricity or other natural resources. An energy crisis may be referred to as an oil crisis, petroleum crisis, energy shortage, electricity shortage or electricity crisis.
Under consumption
In under consumption theory, recessions and stagnation arise due to inadequate consumer demand relative to the amount produced.
One of the early under consumption theories says that because workers are paid a wage less than they produce, they cannot buy back as much as they produce. Thus, there will always be inadequate demand for the product. This, of course, ignores other sources of demand, to which we return below.
Overproduction
In economics, overproduction refers to excess of supply over demand of products being offered to the market. This leads to lower prices and / or unsold goods.
Effects of recessions
Bankruptcies
Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor (involuntary bankruptcy) in an effort to get back a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the bankrupt individual or organization).
Credit crunches
A credit crunch (also known as a credit squeeze or credit crisis) is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates. In such situations, the relationship between credit availability and interest rates has implicitly changed, such that either credit becomes less available at any given official interest rate, or there ceases to be a clear relationship between interest rates and credit availability i.e. credit rationing occurs. Many times, a credit crunch is accompanied by a flight to quality by lenders and investors, as they seek less risky investments (often at the expense of small to medium size enterprises).
Deflation (or disinflation)
Deflation in economics is a persistent decrease in the general price level of goods and services, when inflation is below zero percent, resulting in an increase in the real value of money - a negative inflation rate. When the inflation rate slows down (decreases, but remains positive), this is known as disinflation.
Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically.
While almost all economic theories dismissed deflation as being less than even a remote possibility in modern economies in the last three decades of the 20th century, the only major theory that deals with periods of inflation and deflation is the long-wave cycle known as the Kondratieff wave.
Unemployment
Unemployment occur when a person is available to work and currently seeking work, but the person is without work. The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the labor force who are unemployed.
:SugarwareZ-149:
Causes of recessions
Currency crisis
A currency crisis, which is also called a balance-of-payments crisis, occurs when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange or a store of value. It is a type of financial crisis and is often associated with a real economic crisis.
Energy crisis
An energy crisis is any great bottleneck (or price rise) in the supply of energy resources to an economy. It usually refers to the shortage of oil and additionally to electricity or other natural resources. An energy crisis may be referred to as an oil crisis, petroleum crisis, energy shortage, electricity shortage or electricity crisis.
Under consumption
In under consumption theory, recessions and stagnation arise due to inadequate consumer demand relative to the amount produced.
One of the early under consumption theories says that because workers are paid a wage less than they produce, they cannot buy back as much as they produce. Thus, there will always be inadequate demand for the product. This, of course, ignores other sources of demand, to which we return below.
Overproduction
In economics, overproduction refers to excess of supply over demand of products being offered to the market. This leads to lower prices and / or unsold goods.
Effects of recessions
Bankruptcies
Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor (involuntary bankruptcy) in an effort to get back a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the bankrupt individual or organization).
Credit crunches
A credit crunch (also known as a credit squeeze or credit crisis) is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates. In such situations, the relationship between credit availability and interest rates has implicitly changed, such that either credit becomes less available at any given official interest rate, or there ceases to be a clear relationship between interest rates and credit availability i.e. credit rationing occurs. Many times, a credit crunch is accompanied by a flight to quality by lenders and investors, as they seek less risky investments (often at the expense of small to medium size enterprises).
Deflation (or disinflation)
Deflation in economics is a persistent decrease in the general price level of goods and services, when inflation is below zero percent, resulting in an increase in the real value of money - a negative inflation rate. When the inflation rate slows down (decreases, but remains positive), this is known as disinflation.
Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically.
While almost all economic theories dismissed deflation as being less than even a remote possibility in modern economies in the last three decades of the 20th century, the only major theory that deals with periods of inflation and deflation is the long-wave cycle known as the Kondratieff wave.
Unemployment
Unemployment occur when a person is available to work and currently seeking work, but the person is without work. The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the labor force who are unemployed.
:SugarwareZ-149: