Great Recession

From Wikipedia, the free encyclopedia This article is about the global economic downturn during the early 21st century. For background on financial market events dating from 2007, see financial crisis of 200708. The Great Recession[1][2][3][4] (also referred to as the Lesser Depression,[5] the Long Recession,[6] or the global recession of 2009[7][8]) is an ongoing marked global economic decline that began in December 2007 and took a particularly sharp downward turn in September 2008. The initial phase of the economic crisis started with a financial liquidity crisis, dated to have started on 9 August 2007, at the interbank lending market when central banks had to step in with liquidity lending to the banking market. This was a response to a situation where BNP Paribas temporarily had to block money withdrawals from three hedge funds - citing a "complete evaporation of liquidity".[9] The bursting of the U.S. housing bubble, which peaked in 2006,[10] caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally and creating an interbank credit crisis.[11][12] It began as a national recession in United States in December 2007, but only met the IMF criteria for being a global recession, requiring a decline in annual per-capita real World GDP (Purchasing Power Parity weighted), in the single calendar year 2009.[13][14] The IMF global recession definition does not evaluate quarterly data, despite the fact that quarterly data are being utilized as recession definition criteria by all G20 members, representing 80% of the World GDP[citation needed]. Published estimates of quarterly real World GDP,[citation needed] as well as seasonal adjusted PPP-weighted real GDP for the G20-zone, show a direct quarter on quarter decline during the three quarters from Q3-2008 until Q1-2009, which more accurately mark when the recession took place at the global level.[15] The exact start and end-point for the recession at the national level, however greatly varied from country to country, and some countries did not experience any recession at all. Many countries in Europe had a second recession, starting on average about three years after the first one. Some (Germany, Switzerland, Sweden) did not have a second recession. Most countries outside Europe did not have a second recession. The recession affected the entire world economy, with greater detriment to some countries than others, but overall to a degree which made it the worst global recession sinceWorld War II.[13][14] It was a major global recession characterised by various systemic imbalances, and was sparked by the outbreak of the U.S. subprime mortgage crisis andfinancial crisis of 200708. The economic side effects of the European sovereign debt crisis,[16] austerity, high levels of household debt, trade imbalances, high unemployment, and limited prospects for global growth in 2013 and 2014,[17][18] continue to provide obstacles for many countries to achieve a full recovery from the recession.[19][20][21]

Types of GDP
GDP stands for gross domestic product. GDP is a measure of the economic output of a country. It is usually defined as the total market value of goods and services produced within a given period after deducting the cost of goods and services used up in the process of production, but before allowances for depreciation. Most countries compile estimates of their GDP based on guidelines from the United Nations. The three different ways to calculate GDP should all theoretically give the same result.

1. GDP (E)
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GDP (E) is GDP calculated using the expenditure approach. It is the sum of expenditures on household consumption, government consumption, gross fixed capital expenditure, changes in inventories and net exports. Net exports are exports minus imports. GDP (E) is the most used measure of GDP and is considered the most accurate measure.

GDP (I)
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GDP (I) is GDP calculated using the income approach. It is derived as the sum of factor incomes, consumption of fixed capital (depreciation) and taxes less subsidies on production and imports. Factor incomes include wages, salaries and other compensation of employees plus gross operating surplus, or profit, of private companies and other entities. In theory, this approach measures the income received by all producers in the country.

GDP (P)
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GDP (P) is GDP calculated using the production approach. It is derived as the sum of gross value added for each industry, at basic prices, plus taxes less subsidies on products. Industries are sectors of the economy such as agriculture, mining and manufacturing. Basic values mean the amounts received by producers, including the value of any subsidies on products, but before any taxes on products. In theory, this approach measures the market value of all good and services produced.

Real or Nominal GDP

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When comparing GDP in one time period with another, the changes are influenced by inflation. The basic measure of GDP in current prices is known as "nominal GDP." When changes are made to account for the influence of inflation, the figure is called "real GDP." It can also be referred to as "GDP at constant prices," or as a "volume estimate of GDP." Real GDP is calculated by dividing nominal GDP by a price deflator. Each of the three measures of GDP can be expressed in real or nominal terms.
In economics and political science, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.[1] The two main instruments of fiscal

policy are changes in the level and composition of taxation and government spending in various sectors. These changes can affect the following macroeconomic variables in an economy:

Aggregate demand and the level of economic activity; The distribution of income; The pattern of resource allocation within the government sector and relative to the private sector.

Fiscal policy refers to the use of the government budget to influence economic activity.
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Stances of fiscal policy[edit]

The three main stances of fiscal policy are:

Neutral fiscal policy is usually undertaken when an economy is in equilibrium. Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity. Expansionary fiscal policy involves government spending exceeding tax revenue, and is usually undertaken during recessions. Contractionary fiscal policy occurs when government spending is lower than tax revenue, and is usually undertaken to pay down government debt.

However, these definitions can be misleading because, even with no changes in spending or tax laws at all, cyclic fluctuations of the economy cause cyclic fluctuations of tax revenues and of some types of government spending, altering the deficit situation; these are not considered to be policy changes. Therefore, for purposes of the above definitions, "government spending" and "tax revenue" are normally replaced by "cyclically adjusted government spending" and "cyclically adjusted tax revenue". Thus, for example, a government budget that is balanced over the course of the business cycle is considered to represent a neutral fiscal policy stance.

Stock market
A stock market or equity market is the aggregation of buyers and sellers (a loose network of economic transactions, not a physical facility or discrete entity) of stocks (shares); these are securities listed on a stock exchange as well as those only traded privately. Stocks are partitioned in various ways. One common way is by the country where the company is domiciled. For example, Nestle, Roche, and Novartis are domiciled in Switzerland, so they are part of the Swiss stock market.

The size of the world stock market was estimated at about $36.6 trillion at the beginning of October 2008.[1] The total world derivatives market has been estimated at about $791 trillion face or nominal value,[2] 11 times the size of the entire world economy.[3] The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to anactual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. Generally considered major stock exchanges are the Amsterdam Stock Exchange, London Stock Exchange, New York Stock Exchange, Paris Bourse, and the Deutsche Brse (Frankfurt Stock Exchange) and Toronto Stock Exchange. In Africa, examples include Nigerian Stock Exchange,JSE Limited, etc. Asian examples include the Philippine Stock Exchange, the Singapore Exchange, the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BM&F Bovespa and the BMV. Australia has a national stock exchange, the Australian Securities Exchange, due to the size of its population. The stock exchange is based in Sydney. Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher risk-adjusted returns than retail investors.[4]

Budget
From Wikipedia, the free encyclopedia For the rental car company, see Budget Rent a Car. For the car insurance company Budget, see Budget Group of Companies. A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms.[1]