Although economists believe that recessions typically begin

Although economists believe that recessions typically begin as stump, investmentspending, they also believe that consumer spending eventually slumps during a recession. Explain why Some economists think the best way to help African countries is for wealthier countries to provide more funds for basic infrastructure. Others think this policy will have no long-run effect unless African countries have the financial and political means to maintain this infrastructure. What politics would you suggest In 2008, in the aftermath of the collapse of the housing bubble and a sharp rise in the price commodities, particularly oil, there was much internal disagreement within the Fed about how to respond, with some advocating lowering interest rates and others contending that this would set off a rise in inflation. Explain the reasoning behind each one of these views in terms of the AD-AS model.(You may explain the reasoning with the help of the diagram.)

Solution

Answer1: It is absolutely true that recessions start as a result of downfall in investment and result in downfall in investment and that is the reason that we need government intervention to come out of recession. The downside of this economic fluctuation is that your business will become unpredictable.

At times, you will find that customers have vanished into thin air - while during other times, you might think that you experiencing a sales boom.It pays to have a cool and calm head during such fluctuating periods.

During a recession, interest rates could come down; and in case you need to apply for a loan, then you may not be faced with high interest rates.

The only problem is, since there will be a liquidity crunch in the monetary markets, you could have a tough time qualifying for a loan as lenders\' qualifying standards go invariably higher.

A recession could induce the stock markets and property markets to fall drastically.

This could offer you a chance to invest in stocks or property due to lower prices. And once the economy moves back into the boom cycle, then your investments will be worth quite a lot more.

As inflation eats into the pockets of your employees, they could ask for higher salaries in order for them to maintain their lifestyles.

You might then have to let go inefficient employees in order to maintain your payroll at the same level.

Factors that Cause Recessions

High interest rates are a cause of recession because they limit liquidity, or the amount of money available to invest.

Another factor is increased inflation. Inflation refers to a general rise in the prices of goods and services over a period of time. As inflation increases, the percentage of goods and services that can be purchased with the same amount of money decreases.

Reduced consumer confidence is another factor that can cause a recession. If consumers believe the economy is bad, they are less likely to spend money. Consumer confidence is psychological but can have a real impact on any economy.

Reduced real wages, another factor, refers to wages that have been adjusted for inflation. Falling real wages means that a worker\'s paycheck is not keeping up with inflation. The worker might be making the same amount of money, but his purchasing power has been reduced.

Recessions and Gross Domestic Product

An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time. An example of one type of GDP would be the value of all the automobiles produced within the United States for one year. GDP only takes into account new products that have been manufactured. Therefore, if a pre-owned car lot were selling pre-owned cars, they would not be included in the GDP calculation.

Answer2: Main problem with African countires is curruption. It would be better that wealtheir countries adopt 2 lac kids from these countries and educate them and send them back to their nation. it will take longer time but it will be very effective

However, aid is not necessarily the best way to help a country. For one thing, billions of dollars of aid often goes missing, into corrupt governments or inefficient administration. A second point is that many foreign aid projects are unsuitable for the target country. Many agencies build huge dams or industrial projects that fail after a few years or that do not involve the local people. Furthermore, much aid returns to the donor. This can be in the form of expensive specialized equipment and experts from the donor country.

There are many other ways we can help poor countries. Opening up trade barriers, so that poor countries can sell their goods is one way. Another is to remove subsidies so that imported goods from poorer countries can compete fairly. A third method is to forgive debts. Many poor countries have huge interest repayments on old loans.

The needs of the poorer countries may seem obvious. However, although our humanity makes us want to help eliminate poverty and suffering, we must examine the real needs of poor countries and implement solutions that will benefit both them and us.