This Article is About
economic recession
business establishments
retail establishments
public consumption
business profit
Economic Recession
Join 1000's of Authors at StreetArticles Today!

Economic Recession

In simple words economic recession is a slowdown in the economic activity. During recession the production, investment, spending, employment, income, business profit, capacity utilization etc. fall and at the same time unemployment and bankruptcy rise.

Effects of economic recession

Let us see on a very basic level what happens when there is an economic recession.

During recession, there will be a decline in the sales revenue and profit. When there is a decline in the sales revenue and profit of a business establishment, there will be a cut in the spending, hiring new employees and forced lay-offs and/or reduction in the manpower. If it is a manufacturing company, it will cut the production to minimize the cost because of reduction in the sales and hence revenue. New products will not be rolled out and research and development will be slowed down or even stopped. Spending on advertisement and marketing will be reduced. As a chain reaction, those small and medium establishments supplying raw materials to this manufacturing company also will be affected and they in turn will be forced to take necessary precautionary steps to sustain their business.

Employees will lose jobs, so there will be unemployment in the country and people will be forced to cut their spending. When they reduce their spending, many retail establishments will be affected. So, they will also take precaution for their survival.

The Gross Domestic Product (GDP) of a country is affected.

GDP is the public consumption + government outlays + investments + net exports where net exports (net export being export less imports)

Share Markets will be affected due to falling stocks. Shareholders will be upset by the falling share values because they suffer a loss in their investment. They will try to sell the shares they hold of a company in distress at reduced rates and reinvest in other better-performing shares. This will upset the credibility of the companies affected by such sales.

Business establishments will not get money from their customers and they will be forced to offer discounts to recover as much as possible from the market. When a company or person does not have money to pay the suppliers or repay the loan outstanding, they will resort to late payment or no payment at all. So the suppliers as well as banking establishments will be affected by this. Suppliers will not any more supply raw materials to such companies. Banks will stop giving loans and be forced to take action on defaulters by ceasing properties or vehicles that they have financed.

When a business cuts its manpower, more work will have to be done by less people and their work timings may increase without any increase in their wages or benefits. Employees will be unhappy and their morale will be suffered. This will also reflect in the output and quality of the produced goods. At a stage when a business cannot sustain further, it will be forced to shut down or file a bankruptcy.

People who cannot afford to meet their living will resort to practices like theft and burglary and there will be unrest in the community. Those who cannot any more survive will take it to the extreme of committing suicide unable to face the public.

Thus recession produces a chain reaction in which people from top to bottom will be affected. Recessions will come and go. In some cases the impact will be severe and last longer than others. Some countries will be affected more than others. But it will not last for ever. We know very much the effects of the recent recession which actually started in December 2007 and lasted almost for 18 months – up to June 2009.

There will always be bright light at the end of the tunnel.


Street Talk

No comments present
You May Also Like
Managing Your Money In Difficult Economic Times
The consumer society has led us to believe that we can have it all. If we can’t afford it, we can take out a loan or an overdraft to cover it. However, is this still a sensible way to continue to live in view of the worldwide economic recession? If…
By: FeedMyMind in  Finance  >  Budgeting   Jul 28, 2012  
0
  Likes: 0

Where To Find a Job Online
The economic recession that is ravaging the world does not spare big economy like US, UK, Japan and the rest of them. The situation had forced many companies to go under and their work force being sent to labour market. Those businesses that are still coping and managing the situation…
0
  Likes: 2

Home Improvement Tips When You Are In Debt
Whether you own your own home, rent an apartment, or just have some yard work that needs to be done, it is all considered home improvement. While it can be fun to work on your home and make it more valuable and presentable, it is also expensive and time consuming.…
By: David Schmidt in  Finance  >  Debt Management   Jul 14, 2012  
15
  Likes: 5

Payday Loan Laws In Ohio
The economic recession has hit the state of Ohio and the rest of the rust belt very hard. Payday loan laws in Ohio must be up-to-date with the way that citizens in the state are feeling or else people will find it hard to live. Many of the people in…
By: David Schmidt in  Finance  >  Debt Management   Oct 02, 2012  
8
  Likes: 6

Payday Loan Laws In Nevada
As one of the hardest hit states from the economic recession of 2008, Nevada has had to take precautionary measures to protect out of work citizens. In a state with one of the highest unemployment rates in the entire country, many people have been turning to payday loans in order…
By: David Schmidt in  Finance  >  Debt Management   May 27, 2013  
1
  Likes: 2

Whatever Happened to Cheap Tires?
You have probably noticed it by now. You go to the grocery store, and your bill is way more than you had to budget for a few years back. You leave the store to fill up the car, and notice you have to drop almost $80-100 each time just to…
By: Dan18 in  Automotive  >  Trucks   Nov 29, 2012  
1
  Likes: 1

United Kingdom Payday Loan Trap
Like much of the western world, the United Kingdom has faced some serious hardships over the past few years. The economic recession has hit the people hard as jobs are moving overseas and the austerity measures of the nation’s government start to take root. Many of the people in the…
By: David Schmidt in  Finance  >  Debt Management   Jul 16, 2012  
12
  Likes: 6

Millionaire Society Review, Legit Or Scam?
Introduction In this time of economic recession when so many people are losing or have already lost their jobs or businesses many are looking for legitimate ways to replace that lost income. There is a lot of money to be made on the internet but unfortunately the climate is ripe…
By: K. Les Baker in  Internet and Businesses Online  >  Internet Marketing   Apr 19, 2011  
2
  Likes: 9

Obama's Chances at the Polls
It is most instructive to assert that the chances of US president, at the 2012 Presidential polls are a matter of International discourse. This obvious truth stems from the fact that the United States as the world’s leading country, commands a lot of interest even beyond the territorial confines of…
By: Tony13 in  Politics  >  World Politics   Jan 17, 2012  
0
  Likes: 0

I Need To Make Money
Introduction Dear friend I hear ya! The search engines like Google and Yahoo are working overtime with people entering the search phrase I Need To Make Money! So many people out of work or about to be out of work. And Spring Break right around the corner. And of course…
By: K. Les Baker in  Internet and Businesses Online  >  Internet Marketing   Apr 19, 2011  
0
  Likes: 2

Who Can Make Money Online?
It would seem that making money online is for the select few. Nothing could be further from the truth. I recently came across the profiles of different people who have made money online using various strategies. You will be pleasantly surprised and, I might add, even mad at yourself for…
0
  Likes: 0

Shopping for Samsung Mobiles Online Securely
Nowadays, online shopping is becoming the best approach to help people get Samsung mobiles. First, because of busy schedule, many people have to buy it through online shopping, for it can help them save a lot of time. Second, due to economic recession, online shopping can let people spend less…
By: Abby Brant in  Communications  >  Mobile Cell Phone   Sep 30, 2013  
0
  Likes: 0

California Towns Declaring Bankruptcy
The latest casualty of the economic recession in America is the California city of Mammoth Lakes. This ski resort has been the destination for many enthusiasts, but unfortunately does not have the money to continue. This is the second California city that has filed for bankruptcy and it is a…
By: David Schmidt in  Finance  >  Debt Consolidation   Jul 06, 2012  
14
  Likes: 9

An Advice to Overcome the Financial Crisis
There are too many crazy things going on out there because of this economic crisis. There are too many people on the edge of losing their jobs, and too many people who already lost their jobs and are having a hard time finding another. People who have a job aren’t…
By: Axel in  Internet and Businesses Online  >  Internet Marketing   Jul 18, 2012  
0
  Likes: 0

Is Forex Exchange Trading for you?
Foreign exchange or even forex currency trading is the way through which people can invest their money. This system works due to day-to-day fluctuations within forex exchange currencies. Whenever, the forex trading system changes, it brings change in the forex rates and Pips. If the value of the dollar suddenly…
By: wirefax in  Finance  >  Currency Trading   Oct 02, 2011  
0
  Likes: 0

Article Views: 3253    Report this Article