Are We Going into a Recession and How Do We Deal?

We have heard a lot of buzz lately about the economy. Most economists say that the economy is good; others say that we will be in a recession soon, and some have even gone as far as to claim that we are currently in a recession. This article will explain to you what a recession is and how to deal.

Officially, a recession is when the economy experiences negative growth for two consecutive quarters. That means instead of producing more jobs or making more money than last quarter the economy makes less. One of the most popular ways economists measure the economy is by GDP. GDP stands for Gross Domestic Product. The GDP is the final market value of all goods and services produced inside an economy within a given period of time. It is measured by adding up all the consumption, investment, government spending and net exports (exports-import) done inside a country.

The GDP is how economists and analysts determine if the economy is going downhill. The average person uses other factors to determine if the economy is slowing down and things are getting bad. One of the first things that the average American notices is how hard it is to find a job. During a recession unemployment goes up and getting a job gets much harder. The second thing is the demand for high ticket durable goods decreases. Durable goods, such as cars and washing machines, are goods that you do not have to buy very often. You can keep using them over and over again instead of just once. Since these are so more expensive then nondurable goods, people try to buy less of them.

The fact that the GDP had increased in the last two quarters is what stopping some economist from saying we are in a recession. The GDP actually rose in the last quarter by 4.9 percent. The problem is that we have also seen a rise in the number of people who are unemployed. Many experts say that is enough to indicate that we are sliding into a recession.

What can be done to prevent America from sliding into a recession (or get us out of one)? Normally this is something the Fed must take responsibility for. Usually economists recommend that the Feds cut interests rates and Congress takes actions to stimulate the economy. This is usually done by increasing government spending and cutting taxes. This encourages businesses to take risks and spend more money. When businesses spend more money, they usually have to hire people. These newly hired people now have more money to spend. They (hopefully) will use this newly earned money to buy new products. The sale of new products causes businesses to make more products. These businesses must first hire new people and the cycle goes on and goes.

How can the average American help prevent the US from sliding into a recession-by not panicking. A recession is made worst when people panic and start hoarding their money. This prevents them from buying goods from businesses. When people stop buying goods from a business, the business is forced to cut costs. One way businesses cut costs is by laying off workers. Now these workers have less money to spend on goods and the cycle continues. This just increases our chances of going into a recession.

I hope this article helps you understand what a recession is and how it can be prevented. It explains that the major indicators of a recession are GDP and the unemployment rate and how the government and the common people can help prevent a recession.