SP-22 BBA - 4 th

GREAT RECESSION VS
GREAT DEPRESSION
MACROECONOMIC PRESENTATION
PRESENTERS: M. HASSAN
UMAIR KIYANI
01/12/2024 TAHIR RIZVI 1
What is Recession?
In economics, recession is a business cycle contraction, a general
slowdown in economic activity.
During recession, many macroeconomics indicators vary in a similar way.
Production, employment, investment, spending, capacity utilization,
household incomes and business profits all fall.
Bankruptcies and the unemployment rate rise.

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Types of Recession

The recession of 1953 in the U.S.A is The recession in U.S.A in 1973-75 considered a U-
classic V Shaped Shaped recession

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Types of Recessions

The recession of 1980s in USA is the example L Shaped recession occurred in Japan following the
of W Shaped recession bursting of the Japanese assets price bubble in 1990.

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The Great Recession

The housing bubble The subprime

brust mortgage Fiasco

Recession
2008
causes

Sky high price of crude

Dollar devaluation
oil and refined products

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The Great Recession Causes
 Housing Bubble and Subprime Mortgage Crisis:
• Easy Access to Credit: Lax lending standards and low-interest rates led to a surge in mortgage lending. Many
borrowers, including those with poor credit histories (subprime borrowers), were able to obtain loans.
• Housing Price Bubble: The demand for housing increased, leading to a rapid rise in home prices. Speculation
and the belief that housing prices would always rise fueled a housing bubble.
• Mortgage-backed Securities (MBS) and Collateralized Debt Obligations (CDOs): Financial institutions
bundled subprime mortgages into complex financial products, such as MBS and CDOs, which were then sold
to investors. When the housing market declined, the value of these securities plummeted, causing significant
losses.
 High Crude Oil Prices:
• Global Economic Impact: The price of crude oil reached historic highs in 2008, contributing to increased
production costs and transportation expenses. This had a cascading effect on various industries, including
manufacturing and transportation, contributing to a slowdown in economic activity.

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The Great Recession Causes
Dollar Devaluation:
1. Global Economic Imbalances: The U.S. had been running significant trade deficits, and there were
concerns about the sustainability of this situation. The dollar had weakened against other currencies
over time.
2. Impact on Global Markets: The devaluation of the U.S. dollar contributed to global economic
imbalances and affected international trade dynamics.
Financial Market Interconnections:
1. Interconnected Risks: The various factors mentioned were interconnected. The decline in housing
prices and the subsequent mortgage crisis affected financial institutions globally. As financial
institutions faced losses on mortgage-related securities, it led to a broader financial panic and a freezing
of credit markets.
Government Response:
1. Intervention Measures: Governments and central banks worldwide implemented measures to stabilize
financial markets, prevent the collapse of major financial institutions, and stimulate economic recovery.
These measures included monetary policy adjustments, fiscal stimulus packages, and bank bailouts.

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Effects on the World
Worse hit are the poorest countries.
The 15 country Euro zone were defines as a shrinking economy for two
consecutive quarters.
Decrease demand for exports and remittances slow down the Asia pecefic
economy.
Fall in house prices and increase in unemployment in UK economy.
Pakistan’s growth of exports declined from 12.2 percent in 2008 to –7.2
percent in 2009

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What is Depression?
A depression is a sustained, long-term downturn in economy activity in
one or more countries.
Considered, by some economists, a rare and extreme form of recession.
Characterized by economically large increase in employment, falls in the
availability of credit and large number of bankruptcies.
Price deflation, financial crises and bank failures are also common
elements.

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Motives and Attitudes Influencing Social
Media
2. Personal utility impulse:
 “What’s in it for me?”
 This is the personal utility impulse and it may be one of the most important
motives for brands to acknowledge.
 Major motive behind using social media.
 Examples include: information seeking, incentive seeking, entertainment
seeking, or convenience seeking, is a major motive for social media activity.
 60% of Internet users used social media as a source of health-related
information.

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 Stock market crash 1929

Bank Failures

The Great
Deprcession Reduction in purchasing power across the board
Causes

American economy policy with Europe

Drought conditions

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The Great Depression Casues
The Great Depression, which lasted from 1929 to the late 1930s, was a severe worldwide
economic crisis. Several factors contributed to its onset, and here's a breakdown of the causes
you mentioned:
Stock Market Crash of 1929:
1. Speculative Bubble: The 1920s saw a speculative stock market bubble, with people buying
stocks on margin (using borrowed money) in the hope that prices would continually rise.
2. October 29, 1929 (Black Tuesday): On this day, the U.S. stock market experienced a
massive collapse, leading to a significant loss of wealth for investors.
Bank Failures:
1. Financial Instability: The stock market crash led to a loss of confidence in the banking
system, and many banks faced insolvency.
2. Bank Runs: Panicked depositors withdrew their money, leading to bank runs. The lack of
effective banking regulations exacerbated the situation.

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The Great Depression Casues
 Reduction in Purchasing Power:
1. Wealth Destruction: The stock market crash and bank failures resulted in a massive loss of wealth for individuals and
businesses.
2. Consumer Spending Decline: With reduced wealth and uncertainty, consumer spending sharply declined, contributing
to economic contraction.
 American Economy Policy with Europe:
1. Smoot-Hawley Tariff Act (1930): The U.S. implemented protectionist trade policies, raising tariffs on imported goods.
This move contributed to a decline in international trade and strained economic relations with other countries.
2. Global Economic Impact: The protective tariffs exacerbated the worldwide economic downturn by reducing
international trade.
 Drought Conditions:
1. Dust Bowl: The central U.S. experienced severe drought conditions during the 1930s, leading to the Dust Bowl. This
environmental catastrophe significantly harmed agriculture.
2. Agricultural Collapse: Crop failures and soil erosion devastated farming communities, exacerbating economic
hardships.

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Keynesian approach (1933-1942)
1.Aggregate Demand Focus: Emphasized boosting demand for economic
growth.
2.Government Intervention: Used fiscal policy for economic stability.
3.Public Works: Implemented large projects for job creation.
4.Deficit Spending: Advocated running deficits during downturns.
5.Monetary Policy Role: Acknowledged the role of interest rates.
6.Full Employment Goal: Aimed for full employment through demand
management.
7.Legacy: Shaped New Deal policies and mid-20th-century economic
thinking.
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Comparison between Great Recession
and Great Depression

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Comparison between Great Recession
and Great Depression

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Motives and Attitudes Influencing Social
Media

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Thank You !
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