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Recession in Usa

Recession in Usa

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TOPIC: - RECESSION IN US
SUBMITTED BY:SUNIL KARIRA GULSHAN NAGRA KUMAR GODIA GOPAL NATHANI SANTOSH VASWANI (52504) (52512) (52513) (52514) (52515)

SUBMITTED TO:PROF.KIRAN HARDWANI

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ACKNOWLEDEGEMENT

THE MOST PLEASING PART OF ANY PROJECT IS TO EXPRESS GRATITUDE TOWARDS ALL THOSE WHO DIRECTLY OR INDIRECTLY CONTRIBUTE TO WORKING OF THE PROJECT.

WE ARE VERY MUCH THANKFUL TO PROF.KIRAN HARDWANI FOR GIVING US SUCH A FABOULOUS PROJECT WHICH REALLY EMPOWERED OUR KNOWLEDGE.
DUE TO THIS, WE HAVE NOT ONLY LEARNED BUT ALSO GOT WXACT MEANING OF THE TOPIC.OUR MAM HAS ALWAYS ENCOURAGED & MOTIVATED IN AA OUR ENDEAVORS.

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WHAT IS RECESSION?

RECESSION: 
A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.   It is mainly measured by a country's gross domestic product (GDP) Recession is a normal (albeit unpleasant) part of the business cycle; however, onetime crisis events can often trigger the onset of a recession.  A Recession is a contraction phase of the business cycle.

WHAT DOES RECESSION MEAN?

A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

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and wholesale-retail sales . real income. employment. which is normally visible in real GDP.DEFINITION OF RECESSION Significant decline in economic activity lasting more than a few months. 5 . industrial production.

investment. Economist ³Richard C. and L-shaped and W-shaped recessions. Policy responses are often designed to drive the economy back towards this ideal state of balance. and net export activity.ATTRIBUTES A recession has many attributes that can occur simultaneously and includes declines in component measures of economic activity (GDP) such as consumption. U-shaped. government spending. although some argue that their causes and cures can be different. such as V-shaped. interest rates. a country's economy should have the household sector as net savers and the corporate sector as net borrowers. and government policies. household savings rates. As informal shorthand. economists sometimes refer to different recession shapes. Koo´ wrote that under ideal conditions. demographics. corporate investment decisions. These summary measures reflect underlying drivers such as employment levels and skills. A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression. recession can develop within the country or create pressure for recession in another country. When these relationships become imbalanced. 6 . with the government budget nearly balanced and net exports near zero.

In a V-shaped recession. 7 . followed by a strong recovery. V-shapes are the normal shape for recession: "There is a strong historical ³snap back´ relationship between the strength of economic recovery and the severity of the preceding recession. Thus. recessions and their recoveries have a tendency to trace out a ³V´ shape. the economy suffers a sharp but brief period of economic decline with a clearly defined trough.SHAPES OF RECESSIONS V-SHAPED RECESSION The Recession of 1953 in the United States is a classic V-shape.

and in the first quarter of 1954 it shrank by 2 percent before returning to growth.A clear example of a v-shaped recession is the Recession of 1953 in the United States. Thus GDP growth for this recession forms a classic v-shape. well above the trend. In the fourth quarter the economy shrank by 6. tipping the economy into recession. In 1953 growth began to slow. In the early 1950s the economy in the United States was booming.4 percent.2 percent. the economy was growing at an 8 percent pace. By the fourth quarter of 1954. in the third quarter. but because the Federal Reserve expected inflation it raised interest rates. 8 . the economy shrank by 2.

says a U-shaped recession is like a bathtub: "You go in. You stay in. and only slowly return to trend growth. but you don't come out of the bathtub for a long time. The sides are slippery. GDP may shrink for several quarters. In early 1973 the economy began to shrink and continued to decline or has very low growth for nearly two years. former chief economist for the International Monetary Fund. the economy climbed back to recovery in 1975. 9 .U-SHAPED RECESSION The Recession of 1973±75 in the United States could be considered a U-shaped recession. A U-shaped recession is longer than a V-shaped recession. Simon Johnson. and has a less-clearly defined trough. maybe there's some bumpy stuff in the bottom. After bumping along the bottom. The 1973±75 recession can be considered a U-shaped recession. You know.

The economy 10 . A W-shaped recession or "double dip" recession. shrinking at an 8 percent annual rate from April to June of 1980. The economy fell into recession from January 1980 to July 1980. emerges from the recession with a short period of growth. occurs when the economy has a recession. but quickly falls back into recession. The National Bureau of Economic Research considers two recessions to have occurred in the early 1980s. The Early 1980s recession in the United States is cited as an example of a W-shaped recession.W-SHAPED RECESSION The Early 1980s recession in the United States is sometimes given as an example of a W-shaped recession.

the "double dip") from July 1981 to November 1982. The economy then entered a period of mostly robust growth for the rest of the decade. and in the first three months of 1981 grew at an 8. the economy dipped back into recession (hence. As the Federal Reserve under Paul Volcker raised interest rates to fight inflation. 11 .then entered a quick period of growth.4 percent annual rate.

Japan's economy 12 . The Japanese asset price bubble led to a Lost Decade in Japan. followed by a flat line makes the shape of an L. this period has been characterized as an L-shaped recovery. compare also "malaise". if ever. This is the most severe of the different shapes of recession. The steep drop.L-SHAPED RECESSION An L-shaped recession occurs when an economy has a severe recession and does not return to trend line growth for many years. A classic example of an L-shaped recession occurred in Japan following the bursting of the Japanese asset price bubble in 1990. From the end of World War II throughout the 1980s. Alternative terms for long periods of underperformance include "depression" and lost decade.

S. and experienced years of sluggish growth. In the late 1980s a massive asset-price bubble developed in Japan. After the bubble burst the economy suffered from deflation. 13 . Because the late-2000s recession in the United States followed a similar economic bubble (the United States housing bubble) some economists fear the U.was growing robustly. never returning to the higher growth Japan experienced from 1950-1990. economy could enter a prolonged period of low growth even after recovering from the recession.

then it could be said that inflation is fanning the flames of a possible recession. or Gross Domestic Production. then this could be another sign that the economy is in recession. Large companies start giving depressing profit figures. Prices of property and stocks come down drastically. registers a continuous downward fall. but nobody has the funds to buy them. the rate of jobless people remains steady every month. Companies stop filling vacancies. 14 . then this could be another indication of a falling economy. Usually. vehicles. Many companies might also offer voluntary retirement programs in order to reduce their workforces and cut expenses. When many companies across all sectors start giving out depressing sales and profit figures. But if there is a constant. steep rise in that number.and the government seems helpless to do anything . When a country's GDP. businesses and credit cards. but nobody buys them. Prices of essential commodities shoot up. then it can be truly said that the economy has been hit by a recession.CAUSES OF RECESSION The rate of joblessness assumes disturbing proportions. then this could be a sign of recession. then this will indicate that the recession has now reached your door. When prices of food. then alarm bells should start ringing. When repossessed homes and stock prices come down in value. fuel and other utilities shoot up . The country's GDP goes down. When borrowers are unable to pay back their loans on homes. When you start feeling the pinch and start worrying about your own future on the above points. then this again is another sign that a recession has afflicted the economy. You start worrying about all of the above. When companies decide to keep their job openings vacant instead of hiring new staff. Borrowers start defaulting.

then this again is another sign that a recession has afflicted the economy. then alarm bells should start ringing. When borrowers are unable to pay back their loans on homes. When many companies across all sectors start giving out depressing sales and profit figures. 15 . fuel and other utilities shoot up . When prices of food.then it could be said that inflation is fanning the flames of a possible recession. Borrowers start defaulting. Prices of essential commodities shoot up. businesses and credit cards. vehicles. When companies decide to keep their job openings vacant instead of hiring new staff. Companies stop filling vacancies. then this could be another indication of a falling economy.and the government seems helpless to do anything .Large companies start giving depressing profit figures.

any near-term recovery in housing must now fight a record supply availability.REASONS OF RECESSION 3 reasons why the US faces recession in 2008: 1. of course. Yet the massive oversupply of homes and condos for sale has pushed prices down at a record clip and made additional foreclosures even more likely. higher insurance costs and restricted credit in my view. Next year. the slowdown in residential and commercial construction will send secondary ripple effects throughout the economy. take huge paper losses in the bargain. and pull in their financial horns. Thus. the subprime mortgage fiasco. Construction and home furnishing suppliers sell less output and make fewer investments. Moreover. More ripples from the subprime mortgage fiasco The most important signal flashing recession is. individuals and families with poor credit were suckered into low-down-payment/low-interest adjustable mortgages that simply cannot be maintained or repaid under current conditions. will be the Year of the Auction. falling prices. The financial institutions have also been punished well sort of. unfortunately. After years of monetary inflation on the part of the Federal Reserve. Their incentive is to sell the property quickly before their equity evaporates or the financial institution repossesses it. Even local governments will be pinched by declining property-tax a near-term impossibility 16 . Various institutions including hedge funds that hold these poorly performing debt obligations have been forced (by accounting rules) to 'write down' the value of these assets. Laid-off construction workers don't spend money.

3. Sky-high crude oil is near-term recession risk The second major factor indicating a near-term recession is the sky-high price of crude oil and refined product. Dollar devaluation makes these investments less attractive and any disinvestment in these areas would sharply drive bond prices down and increase interest rates. a falling dollar translates into still higher crude oil prices. I disagree for three reasons. the bulk of crude oil purchases take place in dollars. higher prices will reduce some consumption. the US dollar is the major reserve currency of the international monetary system and dollar-paying investments (such as US Treasury bills and bonds) are held in massive amounts by foreign banks and governments. Higher costs of production will lower profits. and thus positive for the economy as a whole. Pushed upward by world-wide speculative Middle East war fears and increases in demand (especially from China). 17 . The third reason why dollar devaluation makes recession more likely is that it effectively prevents the Federal Reserve from pushing US interest rates much lower. Second. 2. Things are likely to get worse before they get any better. The only good news here is that any substantial economic slowdown in 2008 will eventually moderate the price of oil and other commodity prices as well. Dollar devaluation is real wild card The third factor in the current recession scenario and the real wild card is the continuing decline in the value of the dollar in international money markets caused by our Iraq blunder and the Federal Reserve generated oversupply of dollars. First. increasing energy prices act as an inflationary 'tax' on domestic production and consumption throughout the market economy. Some economists would argue that a devalued dollar is good for US exports. Any additional Fed easing (inflation) would be seen as a signal of even further future dollar devaluation and even higher dollar prices for oil.assessments and fewer developer fees.

we will not be able to 'inflate' our way out of this recession this time. 18 . We will simply have to take our lumps and let market forces liquidate the bulk of the malinvestments caused by the unprecedented Greenspan money bubble.Unfortunately. This liquidation process will not be pretty but it is necessary to restore a sustainable economic recovery in the years ahead.

finance crunch or credit crisis) is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. however. 19 . A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates. a slow-down in the inflation rate (i. which is defined as the percentage of those in the labor force who are unemployed. conversely. when the inflation decreases. The prevalence of unemployment is usually measured using the unemployment rate. deflation is a decrease in the general price level of goods and services. but still remains positive. resulting in an increase in the real value of money a negative inflation rate. The unemployment rate is also used in economic studies and economic indices such as the United States¶ Conference Board's Index of Leading Indicators as a measure of the state of the macroeconomics. Unemployment Unemployment occurs when a person is available to work and seeking work but currently without work. This should not be confused with disinflation. Credit crunch A credit crunch (also known as a credit squeeze. Deflation occurs when the annual inflation rate falls below zero percent. bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). Deflation Deflation (or disinflation) economics. In the majority of cases. deflation increases the real value of money.e. Inflation reduces the real value of money over time.EFFECT OF RECESSION Bankruptcy It is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring.

290.39.000 jobs lost December 2008 ± 632.000 jobs created 20 .000 jobs created May 2010 .109.000 jobs lost February 2009 ± 681.000 jobs lost May 2009 ± 303.000 jobs lost September 2009 ± 263.000 jobs lost November 2009 .413.208.000 jobs created April 2010 .000 jobs created December 2009 .000 jobs lost October 2008 ± 240.000 jobs created March 2010 .000 jobs lost January 2009 ± 741.000 jobs lost April 2009 ± 519.000 jobs lost November 2008 ± 333.14.000 jobs lost July 2009 ± 276.64.000 jobs lost August 2009 ± 201.000 jobs created February 2010 .000 jobs lost June 2009 ± 463.000 jobs lost March 2009 ± 652.000 jobs lost January 2010 .Net job gains and losses by month in the United States September 2008 ± 280.000 jobs lost October 2009 ± 111.

6. according to the Bureau of Labor Statistics 21 .5% Since the start of 2008.7 million jobs have been lost.June 2010 .6 million jobs lost 2009 (January 2009 ± December 2009) ± 4.125.N/A Current unemployment rate: 9.2 million jobs lost 2010 (January 2010±present) .000 jobs lost 2008 (September 2008 ± December 2008) ± 2.

STOCK MARKET CRASH A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market. Generally speaking. 22 . Stock market crashes are in fact social phenomena where external economic events combine with crowd behavior and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. and extensive use of margin debt and leverage by market participants. They often follow speculative stock market bubbles. Crashes are driven by panic as much as by underlying economic factors. crashes usually occur under the following conditions[citation needed]: a prolonged period of rising stock prices and excessive economic optimism. a market where Price to Earnings ratios exceed long-term averages.

Benefits are missing as companies look to cut cost. India¶s export growth is also slowering down. 23 . real estate owners.EFFECTS ON IT SECTOR IT industries. car Industry. financial sectors. where building projects are half done all over the country and in this tight liquidity situation developers find it difficult to raise finance. investment banking and other industries as well are confronting heavy loss due to the fall down of global economy. One of the casualties this time is real estate. Inflation and psychological impact of the us crisis.

bike & truck sales down. And they are working on existing projects only. Projects that are halfway to completion.EFFECTS ON INDUSTRIAL SECTOR Government and other private companies are reluctant in starting new ventures and starting new projects. will run out of cash. The one crore figure has been 24 . Companies in the private sector and government sector are hesitant to take up new projects. Steel plants also cutting production. Projections indicate that up to one crore persons could lose their jobs in the correct fiscal ending March. Car. or companies that stuck with cash flow issues on business that are yet to reach breakeven. Hospitality and airlines are hit by poor demand. .

compiled by Federation of Indian Export Organizations (FIEO). according to the FIEO survey. Together. 25 . they are going to lose four million jobs by April 2009. The textile. garment and handicraft industry are worse affected. which says that it has carried out an intensive survey.

a bank that had invested in Lehman¶s bonds. With all this. This meltdown even have covered the Axis Bank but not to a great extent. 26 . mainly because of the foreign companies pulling out credits to meet high inflations. A sudden fall in the economy directly affected Lehman and Merrill. Lehman Brothers had signed a partnership with some of the real estate companies like Peninsula Land Ltd and DLF Assets. the Indian Sensex swung violently downward. eventually forcing them to file a bankruptcy. Falling down of Lehman had a great impact on the leading international bank. Lehman Brothers had invested a great amount in the stocks of Indian banks that have invested in derivatives. These have also suffered a heavy loss. ICICI Bank.EFFECTS ON BANKING SECTOR Indian banks are facing through a tough time of liquidity crunch.

government and other private companies are reluctant in starting new ventures and starting new projects etc. One danger meanwhile is of a dip in the employment market. More people have sold the shares in the Indian share market than they bought in the recent weeks. 27 .   Many companies has laid off their staffs. India's exports to the US have also grown substantially over the years. This has added to the fall of sensex to lower points. companies have cut down compensations and perks etc.   Indian companies have major outsourcing deals from the US. There is already anecdotal evidence of this in the IT and financial sectors. and reports of quiet downsizing in many other fields as companies cut costs. the number of tourists inflow to India has come down.

which had reached unrealistic levels and assumed the characteristics of a property bubble. The only way out of the mess is for builders to drop prices. but there is not enough evidence of that happening. One of the casualties this time could be real estate. so as to bring buyers back into the market. India s export to the us also grown substantially over the years. Indian companies with big tickets deals in the us are seeing their profit margin shrinking.  A slowdown in the us economy is bad news for India because:   Indian companies have major outsourcing deals from the us. where building projects are halfdone all over the country and in this tight liquidity situation developers find it difficult to raise finances. 28 .

‡ People have started saving money. ‡ Stock broking houses are laying-off people.SHARE MARKET! ‡ Most people have sold the shares. ‡ Foreign investors have pulled out from stock market. 29 .

5% to nearly about 16%. 2008. The Repo Rate has been cut by 50 bps to 5.e.5 % w.Central banks have worked to improve liquidity but are charging higher credits.f. 2008. November 08. The interest rates have drastically increased from 11. The SLR has been cut by 100 bps to 24. 30 .e.f. November 03. The CRR has been cut by 100 bps in two stages.0 % w.

That is to say. everywhere. Nonetheless. While Americans talk nonstop about the Second Great Depression. and then destabilizing most locations reachable by commercial jet. Dubai investors are enjoying one of the biggest real estate booms in the tiny United Arab Emirates¶ history. While Spaniards offer banks their house keys. and Armenia finally thanks the heavens above for its obscurity. Thailand sighs with relief at its sizable reserves. some countries are faring better than others in this stage of the crisis. Wall Street¶s supernova imploded into a black hole.IMPACT ON OTHER COUNTRIES 10 Countries Least Affected by the US Financial Crisis Its official: The United States financial crisis has reverberated around the world. Malaysians shrug. Here are ten countries suffering 80-100% less than the United States: 31 . swallowing up the national economy. everything.

However. Its high domestic demand. protecting it from shady assets. its banking system is probably safe.CHINA I was surprised to learn that China may not be dramatically affected by the United States financial crisis. China is not solely dependent on the United States for financial stability. Bad News: China would be badly hurt by a downturn in export demand from the United States and Europe. which they are using to help bail out the United States. 32 . it plans to use its sizable budget surplus to snap up even more. the United States gobbles up the majority of Chinese-made goods. we in the US rely far more heavily on China than she does on us. It may yet be seriously affected. China owns roughly 19% of US treasuries. Finally. In addition. if needed. and numerous other major trading partners will counter the effects of US contagion. Though the country will feel the international slump. meaning a decrease in consumer demand here will make for a chilly Chinese export market. They re also sitting on a mountain of cash. China s financial system has been closed for many years. Good News: They can rely more on domestic demand and demand from less-affected countries. A host of new trade agreements mean China has a number of potential suitors waiting for vast quantities of goods. As it turns out. Domestic demand is also on the up-and-up. huge pile of capital. such as Brazil.

BRAZIL Latin American economies have boomed over the past few years. The United States is currently Brazil s biggest trading partner. two economies at the top of the world ladder. Bad News: The United States is Brazil s biggest trading partner. Good News: Brazil is positioned to take advantage of trade agreements and foreign direct investment from India and China. stabilized its domestic economy while positioning itself for increased foreign investment. Brazil. other major partners. but is looking to boost transactions and India. 33 . unlike some of its neighbors.

Bad News: High exposure to the EU and foreign direct investment subject Romania to the general effects of the coming global recession. And then there s that military thing. Romania is one of the world s biggest military equipment exporters. Though heavily embroiled in the EU s economy. especially Italy s.ROMANIA Romania s banks are barely exposed to international lenders. Good News: The country remains a hot FDI destination for European companies looking for a good deal. Therefore. a sure winner in today s conflict-rich world society. any economic slowdown it feels will be a secondary result of global patterns. Its strong IT services sector like a miniIndia for the EU is especially attractive. Romania s economy has been growing rapidly for the past few years. 34 . No shocks have occurred in the country itself. Known by its own journalists the tiger of the east.

THAILAND AIG s gigantic Thailand subsidiary. AIA Thailand. 35 . has more than half of the Thai market cornered. Bad news: Thailand s largest insurance company is an AIG subsidiary.1 billion) worth of assets. 383 billion baht ($11. It s also sitting on 286. however. and capital funds worth roughly 1100% of the legally required minimum. The country. Foreigners affected directly by the US financial crisis may have outstanding loans in Thailand. Good news: It s sitting on a pile of cash. isn t worried.67 billion baht worth of reserves (about 8. because the amount of these loans is relatively small.3 billion US dollars).

come in handy. Bad News: No stranger to famines and subsistence farming. for once. both vulnerable to the US financial crisis. North Korea remains isolated enough to limp through the financial crisis relatively unscathed. 36 . people living in this brittle Communist relic may lose hope as foreign direct investors from affected countries stall capital inflows.NORTH KOREA Although the country has recently enjoyed burgeoning trade ties with South Korea and China. Good News: North Korea s economic isolation will.

a business that should float the country for at least another decade. A fortuitous arrangement for all. One of those sectors is oil and China is one of its biggest trading partners. which is moldering under the financial crisis. Good News: Iran does not trade with the United States. provide petroleum to oil-hungry China. however. It does. 37 .IRAN Longstanding sanctions have kept Iran s economy relatively insulated from foreign Investment outside of a select few sectors. Bad News: Iran trades a lot with Europe.

making it an even more likely outsourcing destination for leaner businesses.MALAYSIA This Southeast Asian country hosts a number of multinational manufacturing facilities. It s rumored to be slightly more expensive. 38 . Good News: Companies looking to cut costs come to Malaysia. Bad News: Malaysia does a lot of business with the United States. but produces higher quality goods. Though some of these companies are in the United States. experts say that bad times will promote more offshore production in bargain-rich Malaysia. and is easier to deal with. not less. Malaysia is also gaining a reputation as a good China alternative in manufacturing circles. Malaysia is also gaining a reputation as a solar energy hotspot.

MOROCCO Moroccan officials claim not to be affected by the United States financial crisis because their banks don t contain any subprime assets. It could feed its entire domestic population with the food it produces. especially from France. Its resource and agricultural assets are the real keys to its invulnerability. 39 . Half of its income comes from valuable phosphate mines 32% of the world s reserves a commodity whose prices have increased 700% during the past two years (triggering talk of peak phosphorus ). and tourism to boost its economy. this stable. But that notion only scratches the surface of why Morocco will survive the shakeup. For one. will keep its economy greased enough to offset any losses. These two assets will likely diminish because of the United States crisis. slow-growth economy relies heavily on agricultural assets. beneficial in a world of rising food prices. Bad News: Morocco is heavily involved in foreign direct investment. Good News: Morocco s natural assets. including its coveted phosphate. such as almonds.

It could be argued that Armenia is the least affected country of all. Good News: That same lack of exposure protected Armenia from the US crisis. Bad News: Integration with outside markets means development for small countries like Armenia. 40 . Its relatively undeveloped financial market has so few interests in the outside world that the crisis didn t make a blip.ARMENIA This small Eurasian country hasn t involved itself much in foreign affairs. Officials hunger to expose it more too external markets. Banking is no exception.

exalted commercial real estate market. 41 . but now has a momentum of its own.THE UNITED ARAB EMIRATES Driven by regional oil exports. Dubai s free trade zone. This growth was fueled by oil revenues. and financial services make it an international powerhouse. the United Arab Emirates boasts one of the world s fastest-growing economies. The UK s Guardian calls it the home of the Arabian Dream. This world map shows a list of countries that are considered least affected by the global economic crisis. the world s new version of the spent American dream.

Qatar is the only gulf nation that figures in this "relatively" recession-proof list.Australia takes the top spot followed by China with India and Singapore in equal third place. as voted by international businesspeople are: 42 . The countries perceived to be surviving the economic crisis the best. The data is based on the results of a business confidence survey that was done on international business people of 24 nations to identify which countries they believe are surviving the crisis the best.

43 .

economic slowdown will be more extensive and the recovery milder than previously forecast.9% growth in 2006. economy grew just 2. the recovery could start in 2011. and long term economic development. but the economy could be in recovery before these projects ever break ground. T He infrastructure projects are necessary. 44 .000 jobs in February 2008. a half-percentage less than economists had projected in February 2008. the real estate.3% in the first half of 2008. The 62-economist who responded to the March 2008 survey expect the U. Their prediction is that the economy will bottom out in 2009 and begin to recover in 2010. dealing with the mortgage crisis. Labor Department announced that the U. In 2007.S. However. construction and financial Industries will bottom in 2010.2% in 2007. economy lost 63. after registering 2. The big question is what should the Obama administration do to help recovery along this year? Obama s plan should be directed towards three areas. Government can t solve the recession.S. not adjusted for inflation. last week the U. then we will be back to modest recovery in late 2010 or early 2011. The general economic decline cycle will bottom in 2009 and we could see stability sometime late 2009 or early 2010.S. and falling home prices will decrease consumer spending and lessen the impact of the federal income tax rebate checks. A factor: rising energy costs Economists surveyed said rising fuel prices. a new survey released Tuesday by Bloomberg News indicated. They put the risk of recession during the next 12 months at 50% in March 2008. in a data point many economists consider to be indicative of additional economic slowing. which consumers will begin to receive starting in May 2008. Further. economy to grow at an annualized rate of 0.84 trillion in 2007. The focus of any package should be helping those who are hurting now. The U. but it can cushion the blow. the nation's GDP totaled $13. 2010 is the consensus for when the economy is expected to recover. economists surveyed did not change their recession likelihood estimate.S. declining payrolls.RECOVERY OF RECESSION The U.S. the same percentage as the February 2008 poll. helping those who lost their jobs. However.

2008 to increase liquidity via the launch of it s new. Further. It's also important to point out that the above March 2008 survey was completed before the U. not to be confused with the separate Term Auction Facility. GDP would be seen as a modest victory: some say the first-half 2008 economic performance could be considerably worse. given the housing sector's deep recession and labor market softness.S. Federal Reserve's most-recent decision on March 11. and reflects the softening labor market conditions indicated by the February 2008 jobs report. $200 billion Term Securities Lending Facility for 28-day loans for primary dealers.S. any increase in firsthalf 2008 U. economy's outlook.Economic Analysis: The revised survey is more-pessimistic regarding the U. 45 .S.

before recovering gradually in 2009.. the case for monetary tightening is less compelling. In the major advanced economies. Monetary policy "should be capable of taking more into account . In many emerging economies. it was possible for the world economy to begin its recovery early next year. Against this background. Now countries needed to put their energies into restoring credit flows since economic stimulus plans would otherwise struggle to work. combined in some cases with more flexible exchange rate management. while keeping sight of risks to growth. tighter monetary policy and greater fiscal restraint are required.. but inflationary pressures need to be monitored carefully. rising energy and commodity prices have boosted inflationary pressure. 46 . the accumulation of risks that it had left a bit to one side before. At the same time. the top priority for policymakers is to head off rising inflationary pressure. particularly in emerging and developing economies. caught between sharply slowing demand in many advanced economies and rising inflation everywhere. given that inflation expectations and labor costs are projected to remain well anchored while growth weakens noticeably.CONCLUSION The global economy is in a tough spot." If governments adopted the right policy mix and stimulus programmes were accompanied by the restoration of a functioning financial system. Global growth is expected to decelerate significantly in the second half of 2008. notably in emerging and developing economies.

yahoo.scribd.com 4) www.com 3) www.com 5) www.com 47 .management paradise.ask.com 2) www. WE HAVE TAKEN THE HELP OF THE FOLLOWING WEBSITES:1) www.com 6) www.wikipedia.google.BIBLIOGRAPHY FOR MAKING THIS PROJECT.

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