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Economy and Recession

An economic situation where a nation's gross domestic product or end product is sustaining a negative increase for at least two successive 3 month or six months is termed as an economic recession. The National Bureau of Economic Research 'NBER' states, “recession is a substantial downturn in economic activity lasting more than a couple of months”. Economic decline can last for long periods and may reach up to two years, although one that is only temporary is called 'economic correction', whereas a prolonged recession turns into a economic depression. There are complicated reasons as well as elementary reasons why economic recessions happen and on the eve of any economic slowdown, there tends to be overproduction, where supply exceeds the needs of individuals for wares or services.

Initially, this causes companies to increase their prices and consumers then lose their trust in them and be unsure in purchasing wares. Another instance for this element driving recession will be the psychological impact the events of the September 11 attacks on consumers and the individuals. Some economists suggest that recession may not only be caused by events that have big or huge affect on the people because outcomes that hurt certain companies or industries can also cause recession. Leading innovations or modification in a price of a major component needed in the completion of the product can have dramatic effects on some companies.

Of course, people can spend too much and this can additionally be a underlying reason, when spending more than is necessary may lead to recession and poverty for many people. An example will be the major fuss over the expenditure of America in the Iraq war so economic experts are warning everybody that The U.S. should be mindful with their consumption in the future. Government economic policies can be used to prevent the state of affairs but failure to provide a sound economic plan can lead to economic recession and there are a number of mistakes that can be made in economic policies. Some lead to a boom and bust which means the economy is running in an unsustainable pace and inflation is rising.

Sometimes the people who make the rules make mistakes and it is the economic experts themselves are not intent enough to see the increasing inflation and oncoming recession. Administrators oftentimes regard the onset of recession as just a sluggish economic development which will right itself but failure to deal with this may lead to more economic disasters. This is not just a United States issue and the U.N. declared an alert that there might be a worldwide economic slowdown as early as January 2008. According to the United Nations, world economic development for 2008 is estimated to be 3.4 percent, following on from the down trend since 2006 of 3.9 percent and 3.7 percent in 2007. The collapsing of the housing market bubble of The U.S. and the spreading credit crisis of other nations are some contributory factors for a global recession. Steps can be attempted to avert this scenario entirely but the most difficult part is to recover from the shocks of this economic upheaval.