oducer wants his demand always to be high nsumer wants his buying cost always to be low
Actually, Demand is the price at whic consumer is ready to buy and producer is ready to sell;
Usually, we think; Demand = Quantity But, here Demand = Price; This is because, Price decides the Quantity of Sales; Competitive Price = More Demand; In competitive Price = Less Demand
C] What is Recession?
Recession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product)
GDP = Value of all the reported goods and services produced by the people operating in the country
GDP = MONEY VALUE OF {C + I + G + (X M)}
C] What is Recession?
GDP is a good indicator of economy; Other indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand;
C] What is Recession?
GDP is a good indicator of economy; Other indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand; Note: If the recession continues for next quarter, (>6 months) then we go through DEPRESSION Economy;
C] What is Recession?
There is a joke that economists quote to explain the Difference between Recession & Depression RECESSION
= WHEN YOUR NEIGHBOR LOSES HIS JOB
DEPRESSION
= WHEN YOU LOSE YOUR JOB
Growing economy has to come down if the production rate of goods & services was more than the actual consumption;
A situation in which the supply exceeds the nations ability to consume what has been produced;
Confidence Level Consumers are fearing that they may lose their jobs; So, they have less Millions of confidence to spend money and buy sumers and ducers after they goods; This will result in reduction in demand in the market; Consumers r many job cuts, mand coming down,start saving money instead of spending money; This is a downward spiral in mpanies bankruptcy, the economy;
Confidence Level Consumers arenot stock materials, they Producers do fearing that they may lose their jobs; So, they have less Millions of reduce their productions, gets into the confidence to spend money and buy sumers and cost reduction activities, worried about ducers after they goods; This will result in reduction the profitability, etc in demand in the market; Consumers r many job cuts, mand coming down,start saving money instead of spending money; This is a downward spiral in mpanies bankruptcy, the economy;
d Incidences Happening;
ample: September 11 Terrorist Attack in US; International Airport block in Thailand; Mumbai Attacked in India; etc Series of such incidences leading into a kind of War
Low or No income to They became careful due spend and buy goods to the fear of loss of job
Meals supplying company Demand for other goods Started saving money got the hit come down instead of spending Catering company now, lays off people Demand for other goods come down
Un-related industries
ne industry can hit many other industries when the onfidence level of millions of consumers & producers astically comes down;
- People buying less stuff - Decrease in factory production - Growing unemployment - Slump in personal income - An unhealthy stock market
unhealthy for any nation to be in Recession; Government will take certain countermeasures iminate or reduce the Effect of recession for turnaro
Important Point: Today, it is a market Economy
Producers;
Can produce and sell at their prices
Consumers;
Can decide to buy or not;
, Government does not have direct control on Producers mers behavior; But, they can influence millions of Producer mers with Governments policies;
Monetary Policies
(By RBI)
Government influences the economy by changing how it (Government) spends and collects money
Government influences the economy by changin Fiscal how Policies it (Government) spends and collects money 1] Tax cuts for businesses or for individuals 2] More Spending by Govt. to create jobs 3] Automatic fiscal policy; Unemployment Insurance More money available for spending Individuals get salary and spend money Some income to unemployed people to spend
Government manipulates the available supply Monetary of Policies money in the country More money 1] Reduce reserve available for bank ratio to give loans
What is Reserve Ratio? Each bank has to keep a high % of their assets in RBI (Reserve Bank of India). These assets do not earn any interest to banks. This money kept in RBI is called Reserves; RBI sets certain ratio of this reserves and it is called Reserve Ratio
Government manipulates the available supply Monetary of Policies money in the country More money 1] Reduce reserve available for bank ratio to give loans 2] Lower the interest rates Individuals take more loan
Government manipulates the available supply Monetary of Policies money in the country More money 1] Reduce reserve available for bank ratio to give loans 2] Lower the interest rates 3] Use its own reserved money to buy Govt. bonds Individuals take more loan It becomes an income to Govt. to inject money into the market
I] WOW!!!!!!!!
RBIs Power or Governments Power is double-edged sword; Sometimes, their policies to recover from recession can be counter-productive and it may further worsen the situation;
If we advise our people to save money, then, the multiplication effect is that the demand will not pickup and recession will continue; Very peculiar!!!!! But, am not misguiding you; Just think from a macro level, if everybody in the country stops spending, what will happen?
I] WOW!!!!!!!!
Currently, Most of the developing Slow Down Economies like China, Stage; Not yet India; in Recession
Currently, in Recession
HOPING THIS TIME RECESSION VANISHES SOON SO THAT INDIA GETS BACK TO ITS STRONGER GDP GROWTH RATE OF 8% TO 10% (THOUGH THE EXPERSTS SAY IT WILL LAST TILL Q3 OF 2009)