What is recession?A. It is a phase of business cycle.B. In recession total investment, Income,

employment and demand comes down.C. This process become cumulative.D. Production of goods and services is more

but demand is less, so price level also comes down.

E. It will further discourage investment and employment.

What is business Cycle? Business cycle (or trade cycle) refers to the

fluctuation in economic activity that occur in a more or less regular time sequence in all capitalist societies (or market economy)

Phases of Business CycleA. Expansion or prosperity.B. Recession.C. Contraction or depression.D. Revival or Recovery.

Phases of Business Cycle

General Theories of Business Cycle

ASHUTOSH JOSHIC.U.SHAH COLLEGE OF ENGG &

TECH

Recession in economic historyA. In USA – 1873, 1893, 1907, and presently

felt this crisis.B. 1995 – Tequila crisis in Mexico.C. 1997-99 – Financial crisis of East Asia.D. 1998 – Russian debacle.E. India feel demand recession in 1966-67,

1974-76, 1982-83, 1991-93 and current economic slowdown.

Depression/Recession – Breaks prior concept of Robbins about

economicsA. Robbins – Economics study human behavior

as a relationship between ends and scarce means which have alternative uses.

B. But in recession – resources are not scarce.C. Demand side phenomenon of economics

(Recession) breaks supply side dominance (e.g. depression of 1930).

D. Keynes – In General Theory – produced a phenomenon of effective demand.

Keynes – General Theory of effective demand

A. Lack of effective demand leads to economic crisis like recession and depression.

B. It can be resolved by only effective demand.C. To increase effective demand Keynes

emphasized on Govt. expending and interference in market economy.

D. The multiplier and accelerator effect of investment and expending will further increase effective demand and revive economy.

Recession is different from depression and slowdown

A. Economic activity after peak, start declining, is called recession.

B. But in depression, economic activity start decreasing at very large scale.

C. Slowdown means growth rate start decreasing but not in negative trend.

D. So Indian economy is in more in slowdown mood than recession.

E. American and western economy is affected by recession.

Current Scenario of RecessionA. It started from USA in 2007.B. It originated from American mortgage crisis.C. Then it spread in full American economy.D. Banking, Auto, IT, Real Estate are the worst

affected sectors of this crisis.E. Lehmann Bros., General Motors, got

insolvent in this crisis.F. In global world now, no economic is

decoupled from this crisis.G. World GDP and growth rate decreases

drastically.

Current Scenario of Recession and India

A. India’s greatest partner of trade is Europe and America.

B. Both are worst affected in current economic turmoil.

C. Export sector worst hit by this crisis.D. Textile, IT, Real Estate, Auto and Aviation

sectors are affected by this crisis.E. India got affected by this turmoil in 2008.F. Domestic demands helped to sustain this crisis

to a great extent in comparison with world economy.

Launching FMCG Product in Recession

A. Estimating demand.B. Optimizing capacity utilization.C. Exploiting economies of scale.D. Continuous buying of FMCG goods.E. Blocking entry tactics.

Indicators of RecessionA. Increase in stock of goods.B. Stock market tumbling.C. Decreasing price index.D. Money supply increases but its demand is

less in credit market.E. Downtrend growth rate.F. Increasing unemployment.G. Downturn in consumption.

General causes of RecessionA. Over investment.B. Purchasing power reduction of large

community.C. Shortage of essential input.D. Lack of innovation.E. Fall in credit and fiscal system.F. Non-monetary causes like – strike, draught,

war, flood, etc..G. Monetary causes.H. Saturation in demand.

Preventive measures of RecessionA. Monetary and fiscal policy should be controlled,

flexible and coincide.

B. Avoiding undue increases in plant and equipment etc..

C. Avoiding excessive inventory of raw materials and finished products.

D. Avoid excessive sells, which result in cancellation.

E. Avoiding excessive credit flow in market that may not be recovered leads to recession (e.g. American mortgage crisis).

Relief Measures of RecessionA. Extend public expending.B. Try to increase income of lower and middle

income group.C. Quick liquidation of inventory.D. During recession need based product to be

designed.E. Reduction in manufacturing cost.F. Improvement in quality to enhance demand.G. Growth oriented monetary and credit policy.H. Sales via loan.I. Consumption oriented advertisement.J. Moral boosting by Govt. laws and policy.

Presented by - Santosh KumarMA (Eco)Course Code - PG (Jan 2009)Enrollment No. – 0911002280IMT GhaziabadStudy Centre - Guwahati