The Causes and Effects of Global Recession.

3705 Words Dec 11th, 2010 15 Pages
INTRODUCTION

Here a definition a recession as well a global recession is mentioned. Some causes and effects has been listed. Due to recession occurring, I have identified the effects of recession based on Tesco.

The causes and effects of global recession.

Global financial crisis, increasing for a while, began to show its results in the mid of 2007 into 2008. Worldwide stock markets have subsided, financial institutions have dropped and governments in even the richest nations have had to develop packages to assist their financial organizations. Recession is defined as a slowdown of activities in the economy over a time. The major effect of recession is Inflation as well as currency crisis. A decrease in income may be another
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A decrease in world GDP occurred in many countries, specifically in developing countries. Imports have also declined significantly in importing countries. This was obvious in countries such as China, Taiwan, Mexico, Egypt and Russia. it was stated that GDP fell to 3.8% in the U.S. The impact of recession on employment may not be felt for some time. Investigation in Britain shows that low-skilled, low-educated workers and the immature are in a weak position to unemployment in a downturn. It took Britain five years for unemployment to go back to its initial levels. From 2000 to 2003, the Federal Reserve lowered their target rates. They then raised the funds rate significantly between July 2004 and July 2006. This added to an increase in number of years to the adjustable-rate mortgage rates and made it more expensive for homeowners. As a result, this may have also contributed to the deflating of the housing bubble. Gross Domestic Product declined at an in the last two years in the United States. When GDP collapses, economic growth will also plunge. This is as a result of fewer goods being manufactured and therefore the rate of exports will reduce. It is said that when exports decrease, it will not have sufficient funds to accommodate any growth in the economy what so ever. As a result in the decline in GDP, employment rate will sooner or later begin to drop. As a result of the credit crunch, consumers have less purchasing power therefore…