Recession

Many professionals and experts from around the world believe that a genuine economic recession will be confirmed if GDP (gross domestic product) growth is negative in a period of two or more consecutive quarters.

The roots of a recession and the real basis in fact rest in several quarters of a positive but slowing growth in recession cycle really begins. Often in a mild recession in the first quarter of negative growth is followed by a slight positive growth, negative growth and recession trend continues.

While the "two quarter" definition is globally accepted, many economists find it hard to support it fully, because it does not consider other important economic change variables. For example, the current national unemployment rate or consumer confidence and to use any part of the economic system, and must be considered when determining a recession and its properties.

The agency official responsible for declaring a recession in the U.S. is known as the National Bureau of Economic Research, or NBER. The NBER defines a recession as a "significant decline in economic activity lasting more than a few months."

We often do not receive official word in a recession until we are several months in the NBER, which may take time to calculate the many variables available before making their decision. Although the economic slowdown is likely that they are generally not detected before, is already underway.

It's actually more common than you may be ready to countries throughout the world to experience mild recession. Recession (or slowdown) is a natural result of the economic cycle and will adjust for changes in consumer spending and consumption or rising and falling prices for goods and labor.

Rarely, however, entirely possible to experience a wide variety of these negative factors also lead to a deep recession or even the long economic depression.

Causes of economic recession:

An economic slowdown is mainly attributable to the measures taken to control money supply in an economy. Fed is the body responsible for maintaining the delicate balance between money, interest rates and inflation. When this delicate balance is tipped, the economy is forced to correct itself.

Fed sometimes handles these situations by dumping huge sums of money. This helps to keep interest rates low even as inflation rises. Inflation is the increase in prices of goods and services over time. So if inflation is rising, it means that goods and services cost more now than they did before. The higher inflation, the smaller percentage of goods and services that can be purchased with a certain amount of money. There may be many factors contributing to inflation, which includes but is not limited to increased costs of production, higher costs for energy and / or the national debt.

In an environment where inflation is rife, people tend to cut things like leisure spending. They also have the budget more, spend less money on things they normally indulge in, and start saving more money than they did. So unemployment will rise as companies begin to redundancies to cut more costs, because consumers are not spending as they were. It is these factors together are able to run the economy into a state of recession.

This set of circumstances, combined with the opportunity for people to access larger amounts of borrowing money because of the extremely lax lending practices, creating a cycle of unsustainable economic activity will eventually grind an economy to a near halt existence. One could also say that a recession is in fact due to factors that may inhibit growth, which is accessible from the short-term benefits for an economy that may be caused by such things as spiking oil prices or even war. And while these are very short term in nature, as a rule, they have been known to recover faster than the real crises that happened in the past.

The effects of the recession:

Generally, a recession being detected before it actually happens. There are ways to spot it before it actually affects by observing the changing economic landscape in the quarters to come before the actual onset. You will still see growth in GDP, but it will be combined with the sign of high unemployment, housing prices, stock market losses and the lack of business expansion. When an economy looks more protracted periods of economic recession, it goes beyond a recession, and declared that the economy is in a state of depression.

The only real advantage of an economic recession is that it will help to cure inflation. Indeed, the delicate balance that the Fed is struggling to continue to constrain growth in the economy enough so that inflation wills not happen, but also that a recession will be triggered in the process. Now, the Fed performs this balancing act without the help of fiscal policy. Fiscal policy is usually trying to stimulate the economy as much as possible through such things as lowering taxes, use programs, and ignore the lines.