Recession

Recession = The time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. When the business activity starts to rise again it's called an expansionary period. By this definition, the average recession lasts about a year.' In the United States, the economy follows a somewhat regular pattern of expansion and contraction. The economy will typically expand steadily for six to 10 years and then enter a recession for six months to two years. The point where the recession begins is known as a peak, and the point where it ends is refered to as a trough. Following the trough, the economy expands again toward another peak. Economists call the period of time between two peaks a business cycle. //• f// Strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow. While __Keynesian__ economists may advocate __deficit spending__ by the government to spark economic growth, other __supply-side__ economists may suggest tax cuts to promote business __capital__ investment, while even others such as __laissez-faire__ economists may simply recommend the government remain "hands off and not interfere with the natural market forces of the economy whatsoever.  • Tax cuts for businesses or for individuals - This gives people and corporations more money, which may make them more likely to buy things, which increases demand.   • Increased spending to establish new government jobs - This increases demand for labor, which can lower the unemployment rate.   • Automatic fiscal policies, which kick in right away - One of the most important' automatic fiscal policies is unemployment insurance. This system provides an income for people who are out of work.   • Reduce the reserve ratio - If banks don't have to keep as high a percentage of their assets in reserves, they have more accessible money. This might lead them to offer more attractive loans to their customers, which can help boost economic growth. • • Lower the federal funds rate - This frees up more money for banks, allowing them to  offer more attractive loans. • Lower the discount rate (the rate on federal loans) - This frees up money for banks that are borrowing money from the Fed. Again, these savings may be passed on to the bank's customers. • Use its own reserve money to buy government bonds - Buying bonds translates to income for the U.S. government, which puts more money into the economy.
 * Recession Factsheet **
 * Spotting a Recession **
 * Fixing a Recession **
 * Fiscal Policies **
 * Monetary Policies **