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Assignment on International Economy

   

Added on  2020-10-22

7 Pages1854 Words207 Views
International Economy

Table of Contents1. Reasons for low productivity growth in the industrialized world since the great recession of2007-2009....................................................................................................................................12. Impact of Zero Lower Bounds at nominal interest rates on monetary policy.........................2REFERENCE...................................................................................................................................5

1. Reasons for low productivity growth in the industrialized world since the great recession of2007-2009Recession is a business cycle contraction when there is as general slowdown in economicactivity. It is a significant decline in the economic activity that goes on for more then fewmonths. It is visible in industrial production, employment, real income and wholesale-retailtrade. In technical terms recession is two consecutive quarters of negative economic growth asmeasured by a company's gross domestic product. The great recession which officially lastedfrom December 2007 to June 2009, began with the bursting of an 8 trillion dollar housingbubble. Irrational exuberance in the housing market led many people to buy houses they couldnot afford. This causes loss of money by selling the house for less than their mortgage. Anescalating foreclosure rate panicked many banks and hedge funds. A recession has a dominoeffect, where increased unemployment leads to less growth and a drop in consumer spending,affecting businesses, which lay off workers due to losses (Great Recession, 2017). In the period of recession whole economy gets shattered and this leads to affect everyaspect in a negative manner. As low level of income is their in the hands of general public this isbecause of reduction in the pay scale due to depressed economy. Low level of employment andno new job opportunities in the economy leads to unemployment and general public getsshattered. As it is seen that at the time of recession availability of funds, jobs, income is at theirlowest and general public gets affected. Recession last for some months and years but the effectit puts on economy is very harsh in long run. As the great recession of 2007 to 2009 has lastedbut it has effects economy in such a manner that development of the country has gone slow andlow rate of GDP in the country. The growth of labour productivity and total factor productivitydeclined sharply in countries experiencing a market reduction in the great recession. Labourproductivity is the amount of goods and services produced with the number of labour hours usedin producing those goods and services (Gilman, 2015). As sales and revenue starts declining in the period of recession which leads to decline inprofits. In that time manufacturers are not interested in expanding any money on new productsand which leads to a stop in the economy development. When no new goods and services will bemanufactured and no more resources are purchased or sold this gives a economy a moderate lineon which it operates and no growth is recorded. Effect of recession was very high on industrialsector as they gets affected because of non availability of buyers in the business due to low1

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