*

* Background *STAGES OF MARKET ECONOMY

*What is Recession? *Why Recession happens?

Recession, we need to understand the market economy;

A] TWO STAGES OF MARKET ECONOMY

B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY

TWO STAGES OF MARKET ECONOMY

A1] Growing Market Economy

2] Declining Market Economy

Growing Market Economy

Starting Point = Willingness to buy

Declining Market Economy

Starting Point = Unwillingness to buy

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 = Consumables, I = Gross Investments, G = Government Spending, X = Exports, M = Imports

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;

Why Recession happens?

1.

OVER PRODUCTION

2. LOW CONFIDENCE LEVEL

Why Recession happens?

1.

OVER PRODUCTION
PSEUDO DEMAND

ACTUAL NEED WAS NOT THERE; WRONG PROJECTIONS COMPANIES PRODUCED MORE

A situation in which the supply exceeds the nations ability to consume what has been produced; Supply > Demand

Why Recession happens?

1. LOW CONFIDENCE LEVEL Word of mouth Assignable Cause

2. Word of mouth Low Confidence Level of Millions of consumers and producers after they hear many job cuts, Demand coming down, Companies
Consumers are fearing that they may lose their jobs; So, they have less confidence to spend money and buy goods; This will result in reduction in demand in the market; Consumers start saving money instead of

How to come out of recession?

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?

Hence, Government does not have direct control on Producers & the Consumers behavior; But, they can influence millions of Producers & Consumers with Governments policies;

Government has 2 plans Fiscal Policies

(By Govt.)

Monetary Policies
(By RBI)

Government influences the economy by changing how it (Government) spends and collects money

RBI manipulates the available supply of money in the country

How to come out of recession? Fiscal Policies

Government influences the economy by changing how it (Government) spends and collects money More money available for spending Individuals get salary and spend money

1] Tax cuts for businesses or for individuals 2] More Spending by Govt. to create jobs

Demand picks up; Market can recover;

3] Automatic fiscal policy; Unemployment Insurance

Some income to unemployed people to spend

How to come out of recession? Monetary Policies

Government manipulates the available supply of money in the country More money available for bank to give loans

Reduce reserve ratio

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

Demand picks up; Market can recover;

How to come out of recession? Monetary Policies

Government manipulates the available supply of money in the country

1] Reduce reserve ratio

More money available for bank to give loans

Individuals take more loan

2] Lower the interest rates

Demand picks up; Market can recover;

How to come out of recession? Monetary Policies

Government manipulates the available supply of money in the country More money available for bank to give loans Individuals take more loan

1] Reduce reserve ratio

2] Lower the interest rates

Demand picks up; Market can recover;

3] Use its own reserved money to buy Govt. bonds

It becomes an income to Govt. to inject money into the market

* What is recession * What are the macro economic indicators * How those indicators reflect recession * What effects do they have on us * What should we do in recession as an
organization

* What should we do in recession as an individual

* A period of general economic decline; typically

defined as a decline in GDP for two or more consecutive quarters. A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market

* GDP * Unemployment * Inflation * Exchange rate * HDI

* 1. Great companies transform external threats

into opportunities

* 2. Great companies take advantage of and

profit from changing dynamics in the marketplace

* 3. Great companies catalyze seemingly

"negative" times into positive moves

* 4. Great companies make room for new growth

by "de-cluttering" that which is marginal or ineffective.

* 5. Great companies build their resilience

muscle to thrive in tough times

* 6. Great companies aggressively position

themselves ahead of the competition during economic downturns

* 7. Great companies find the "learning" and the

"grander purpose" hidden within challenging times.

* 1. Get out of debt ASAP * 2. Change your buying pattern * 3. Keep your job as long as possible. * 4. Buy gold coins and silver coins. * 5. Think about how you are going to cook.