Professor & Lawyer

Puttu Guru Prasad

Senior Faculty for
Management Studies
VVIT- Nambur
 What is recession?
A. It is a phase of business cycle.
B. In recession total investment, Income, employment
and demand comes down.
C. This process become cumulative.
D. Production of goods and services is more but
demand is less, so price level also comes down.
E. It will further discourage investment and
employment.
 What is business Cycle?
Business cycle (or trade cycle) refers to the fluctuation
in economic activity that occur in a more or less
regular time sequence in all capitalist societies (or
market economy)
 Phases of Business Cycle
A. Expansion or prosperity.
B. Recession.
C. Contraction or depression.
D. Revival or Recovery.
Phases of Business Cycle
 Recession in economic history
A. In USA 1873, 1893, 1907, and presently felt this
crisis.
B. 1995 Tequila crisis in Mexico.
C. 1997-99 Financial crisis of East Asia.
D. 1998 Russian debacle.
E. India feel demand recession in 1966-67, 1974-76,
1982-83, 1991-93 and current economic slowdown.
 Depression/Recession Breaks
prior concept of Robbins about
economics
A. Robbins Economics study human behavior as a
relationship between ends and scarce means
which have alternative uses.
B. But in recession resources are not scarce.
C. Demand side phenomenon of economics
(Recession) breaks supply side dominance (e.g.
depression of 1930).
D. Keynes In General Theory produced a
phenomenon of effective demand.
 Keynes General Theory of
effective demand
A. Lack of effective demand leads to economic crisis
like recession and depression.
B. It can be resolved by only effective demand.
C. To increase effective demand Keynes emphasized on
Govt. expending and interference in market
economy.
D. The multiplier and accelerator effect of investment
and expending will further increase effective demand
and revive economy.
 Recession is different from
depression and slowdown
A. Economic activity after peak, start declining, is called
recession.
B. But in depression, economic activity start decreasing
at very large scale.
C. Slowdown means growth rate start decreasing but
not in negative trend.
D. So Indian economy is in more in slowdown mood
than recession.
E. American and western economy is affected by
recession.
 Current Scenario of Recession
A. It started from USA in 2007.
B. It originated from American mortgage crisis.
C. Then it spread in full American economy.
D. Banking, Auto, IT, Real Estate are the worst affected
sectors of this crisis.
E. Lehmann Bros., General Motors, got insolvent in this
crisis.
F. In global world now, no economic is decoupled from
this crisis.
G. World GDP and growth rate decreases drastically.
Current Scenario of Recession and
India
A. Indias greatest partner of trade is Europe and
America.
B. Both are worst affected in current economic turmoil.
C. Export sector worst hit by this crisis.
D. Textile, IT, Real Estate, Auto and Aviation sectors are
affected by this crisis.
E. India got affected by this turmoil in 2008.
F. Domestic demands helped to sustain this crisis to a
great extent in comparison with world economy.
 Launching FMCG Product in
Recession
A. Estimating demand.
B. Optimizing capacity utilization.
C. Exploiting economies of scale.
D. Continuous buying of FMCG goods.
E. Blocking entry tactics.
 Indicators of Recession
A. Increase in stock of goods.
B. Stock market tumbling.
C. Decreasing price index.
D. Money supply increases but its demand is less in
credit market.
E. Downtrend growth rate.
F. Increasing unemployment.
G. Downturn in consumption.
 General causes of Recession
A. Over investment.
B. Purchasing power reduction of large community.
C. Shortage of essential input.
D. Lack of innovation.
E. Fall in credit and fiscal system.
F. Non-monetary causes like strike, draught, war,
flood, etc..
G. Monetary causes.
H. Saturation in demand.
Preventive measures of Recession
A. Monetary and fiscal policy should be controlled,
flexible and coincide.
B. Avoiding undue increases in plant and equipment
etc..
C. Avoiding excessive inventory of raw materials and
finished products.
D. Avoid excessive sells, which result in cancellation.
E. Avoiding excessive credit flow in market that may
not be recovered leads to recession (e.g. American
mortgage crisis).
 Relief Measures of Recession
A. Extend public expending.
B. Try to increase income of lower and middle income
group.
C. Quick liquidation of inventory.
D. During recession need based product to be designed.
E. Reduction in manufacturing cost.
F. Improvement in quality to enhance demand.
G. Growth oriented monetary and credit policy.
H. Sales via loan.
I. Consumption oriented advertisement.
J. Moral boosting by Govt. laws and policy.