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 the Difference 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 and producer is ready to sell; Producer Price Consumer Price Demand = Quantity But, 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

Currency Crisis Energy Crisis Liquidity Crisis Over production Inflation

 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.

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 how it (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 money available for spending Demand picks up; Market can recover; 2] More Spending by Govt. to create jobs Individuals get salary and spend money 3] Automatic fiscal policy; Unemployment Insurance Some income to unemployed people to spend Fiscal Policies

1] Reduce reserve ratio More money available for bank to give loans More Disposable Income; Demand Rises; Market rescued 2] Lower the interest rates Individuals take more loan Government manipulates the available supply of money in the country Monetary Policies