Hi! My name is Pero and I am from Croatia. Because I don’t speak good English and because books that speak about economics are hard to understand, can somebody please explain to me with simple words why the United States economy is falling into recession. I need to know for school for tomorrow and I don’t understand. He was saying about housing market, oil, war, and sup prime ledning and asking how economic policy makers are trying to solve this problems! If somebody has time and is wishing to help, I thank you very much!
June 29th, 2009 at 3:19 pm
The simple answer is. 1. America needs to stop giving money
away. 2. They need to start manufacturing goods that are made elsewhere, like China. We use to be a industrial giant.
3. We need to open new avenues to solar power. Give tax
breaks to company’s, that use turbine power from the wind. I
hope I helped you a little Pero. Good Question.
June 29th, 2009 at 3:19 pm
An ecomomy is said to be in recession when there is 2 or more consecutive quarters where it experience zero or negative growth. A lack lustre housing market, low consumer confidence as a result of the subprime mortgage problems and a declining stock market are all possible causes of the US falling into recession.
In normal circumstances, the easiest way for policy makers to solve the problem will be to cut interest rates until a level where the housing market can regain vibrancy, the mortgage problem can become more manageable, the stock market can become attractive and consumer confidence can return.
However what the world is currently facing is not just recession but rather a phenomenon called STAGFLATION i.e. recession or stagnation plus inflation. If policy makers cut interest rates, some of the above problems may be solved but we will have a situation where inflation runs out of control and eventually the world economy gets into even deeper problems. On the other hand if policy makers raise interest rates to control inflation, the economy may get into deeper recession or even depression.
So, under the current circumstances there is no easy solution. Policy makers just have to strike a right balance and make some very serious sacrifices
June 29th, 2009 at 3:19 pm
first of all we ask ourselfs what is economic recession?
in my simple understanding,i think economic recession is a continous record of negative GDP rate.this means instead of an increae in food prduction,there was a decrerase.
hence the only solution to US’s recession is increase in production and however they produce it is their own business.
June 29th, 2009 at 3:19 pm
The free market created a lot of setbacks for America, limited workforce, prohibitive maunfacturing and labour costs, left it unable to compete with foreign labour intensive markets. Many measures were implemented to counteract this in the favour of the west but this has caused an unequal polarity resulting in the banking crisis caused by inflated property values to boost figures.