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Economic recession may be a normal part of the economic cycle but this does not mean that it is easy dealing with it. In fact, a lot of people have already been burned by this problem in the United States. Times are tough in the country and more and more people are feeling the heat of impoverishment.

With the problems in the real estate industry and the job losses that have occurred all throughout the country, more and more people are getting worried about what will happen to them. Essentially, if you have a stable job, it will not be a problem for you. But this does not mean of course that you should just waste away and not do anything about it. All people will be affected one way or the other. It is how we deal with the problem that will determine survival. So how do we survive in times of economic recession? Here are some of the ways.

1. Be aware of it
Forewarned is Forearmed. That mean that when you know something is about to happen, you are already in a way prepared for it. So be aware of what is happening to the country. Know what’s going on. Only by gathering information about the recession can you know how to better deal with it.

2. Save up
One of the best ways to stay stable in times of the economic recession is to save your money and to spend wisely. This is not to suggest that you don’t spend at all and just put everything in the bank. As much as you can, save some money in the bank. You will be able to need this should an emergency happen.

3. Avoid wastage
This is actually one component of saving up. When you save, you make sure that everything that you have bought have been used and have not been wasted. You can start on the dinner table by asking your kids to clean their plates when eating. That way, they will know that they will be forced to eat whatever they got but cannot eat. Alongside this edict, tell them they can get a second helping should they want another but still, they have to clean their plates. No leftovers.

4. Get your family to help
Dealing with economic recession and making sure that the family survives is the responsibility of every member of the family. Even in their own way, your kids can help out by making sure that they are not wasting food or not wasting electricity or water which contributes a lot in the overall household expense monthly. They can do this by making sure that everything is shut off when they leave the room. TVs should not be left open when there is no one watching. Same goes with airconditioning unit and heaters.

5. Get your neighbors to help
You are not the only one feeling the pressure brought on by economic recession. A lot of families in the United States are also scrimping right now just to make both ends meet. Join hands with them and work together. For instance, you can all save gas by getting your kids to school in a car pool. You can all take turns on the wheel. This will also free you to do other things like maybe work part time to supplement the family income.

A country’s economy operates in a cycle. Sometimes you are up and sometimes you are down below. An economic recession is the low part of that cycle. People do not notice that it is happening before because government was swift to act on it and its policies and clout were able to stabilize the country’s economy before much damage is done. However, recently, the efforts of the government and their policies were not enough to stop the downward spiral of the country’s economy.

With rising costs in oil affecting the prices of basic commodities, people are scrimping on their purchases. This has affected companies leading to job losses and financial problems. The real estate industry has also crashed leaving many foreclosed properties because people just can’t afford to pay the monthly premium anymore. The same goes with the banking and insurance sectors who are also feeling the heat of the economic recession.

But what is it really about? How can economic recession affect our daily lives and how is the government responding to it. Here are some of the things that you should know about recession and the things that it can do to you if you don’t watch out.

1. It can make you lose your job
Economic recession is a period known for job cuts. When demand for products lessened and companies lose their money, the only way they can survive is to cut jobs. And this they cab justify as there will also be reduction in production. If you are one of the unlucky few who are working for a company experiencing such losses, you may stand to lose your job.

To prepare for this eventuality, try to check the background of your company. Listen to the office grapevine about potential losses. Usually, you will know if a company is losing money. If you feel that your company is losing money, make a back up plan just in case you lose your job. This is especially true if you are working in the assembly line or in the production line.

2. It can make life harder
Prices will often be high during an economic recession. This is because fewer supply of products will cause a rise in the prices. Although government will try to balance the situation out by introducing tax cuts, this may not help the situation especially if there have been many job losses.

Besides this, outlook in life will also be more pessimistic and sadder. People will try to scrimp on their expenses, no longer going for their usual entertainment. Although, there has been a study that movie tickets sales go up during recession. This is perhaps because people want to forget their problems for a while and just enjoy the world of the make believe.

3. It is not forever
One hopeful thing that people can look forward to is the fact that economic recession is not forever. As mentioned before, recession is a cycle and when you are down, the only way you can go is up. That is why, for the meantime the goal during these trying times is to ride the waves and survive. There is no need to panic or to worry about the future. You’ll see, everything will right itself.

Economic recession may be a new term in your ears but in essence, it is actually a common economic term used to refer to the slowing down of economy. You see, a country’s economy follows a natural cycle. Sometimes it’s up and sometimes it’s down. You just don’t realize that it’s happening because it has not gone this bad since the wall street crash decades before. Now, United States is feeling the heat once again with the rising costs of living and transportation as well as the crash of the real estate industry and just recently the crash of the top banks in the US.

During these times, all you can do is to hope and pray that you will still be able to keep your job and survive the recession until everything is ok again. To do this, you need to save up and make sure that you are ready for every eventuality. Here are some tips on how to deal with every American’s concern right now.

1. Be prepared

What you know cannot kill you. There is nothing wrong and being prepared for potential problems. Even if right now, you don’t have any problems financially, it pays to get ready for the coming challenges. You can do this by saving up some money and putting them in the bank. That way, you can use something for the rainy day.

Think of other ways that you can be prepared and plan around it. Look at your expenses every month and check where you can cut off the extras. With them side by side, you will know just where you are overbudgeting. This is also an excellent way to plan and save for future expenses like for instance, your children’s tuition fees.

2. Save with your consumption

Another way to do this is to make sure that you will be spending less for the household. You can do this by cutting expenses that are not necessary like in luxury items such as clothes, entertainment, trips. If you don’t need it, don’t buy it. Only purchase the items that you know you will be using.

You should also save with your consumption of electricity, gas and water as these are areas that you may not notice you are overbudgeting but usually you are. For instance, ironing clothes piece by piece and not by bulk consumes more electricity. The same goes with leaving the door open when the airconditioning unit is turned on. Always make sure that you turn off the TV after watching it or to be sure, purchase a unit that has a programmable on and off button that you can use. There are also airconditioning models and heaters that you can buy that have this feature.

3. Don’t panic

Economic recession as mentioned to you is a cycle and usually it will have an end. There is no need to feel panicky and feel that all hope is already lost. The more that you feel the panic, the more problems you will have because panic can make you do things without thinking about it or make you so nervous you will be mentally blocked out. So just ride the waves and go with the flow. You’ll never even feel that it’s there.

Economic recession is an event that nobody seems to be happy hearing.  Every time recession is being mentioned in casual conversations, it seems that everybody participating shudder in fear anticipating the worst.

An economic recession is an economic slowdown that happens in two consecutive quarters.  Some economists would say that this is associated with series of events that generally recognized to be “market correction”.  What is this series of events?

An economic recession happens when there is more supply than the actual demand of the product.  This leads to a decline in the gross domestic product.  What happens during economic recession is that it provides a “cooling off” period for creating on new products that will interest the consumers and of necessity.

When compared to agriculture, it is common sense among farmers that the land needs an time interval between the harvesting season and next planting season.  Sometimes farmers would plant a different kind of seed that is known to bring and enrich the land again for the next planting season.  Somehow this applies in financial and trade markets.

Some businesses would see economic recession as the time to reinvent.  Time to innovate and create new products that will create a market hype and again will encourage consumers to purchase goods.  Many businesses who have switched their attention in innovating during economic recessions show high probabilities of succeeding.

Since there is a large selection of products in market trying to capture the unmindful consumers, the period of recession accelerates the quality of products being available in the market.  Since companies are trying to get the consumer’s money, they would likely to produce improved product quality, improved services at lower prices.

Since there are products that would not sell, this would push companies and sellers to inspect their production methods.  This is a good time in filtering out production methods and equipment that compromises the quality, efficiency and speed of creating products.

An economic recession also serves as a wake-up call for everyone to have a balanced spending.  Everyone gets a heads-up about keeping saving accounts updated and saving for any event in the future.  Unfortunately, some people may learn their lesson in the hard way.  There would be some who would be declaring bankruptcy, while in worst cases, there are people who would choose to end their lives.  Economic recession would be a good time to rethink a person’s finances.

Some considerable benefits of economic recession is low housing prices.  Unless, your in the business of selling houses, low prices is not a good news.  However, if you are somebody who is planning on investing and buying a property, a period of recession will help you have the choices that you want.  It is also a good time to look for investment properties.

Housing prices are not the only one who has low prices, company stocks are oven undervalued during economic recession.  A person who is looking for long time stock investment, recession periods would have stocks that are undervalued because a lot of stock holders are more into selling that acquiring stocks.

MarketWatch mentioned other gains from an economic slowdown.  MarketWatch mentioned that this would serve as a wake-up call for overconfident consumers and sellers who are missing out the importance of balancing finance.  And also this would serve as a wake- up call for government to have a stricter finance budget since there will be cutback in the country’s revenues.

Although economic recession is considered a negative event, it is time to turn the negative event into a positive situation.  It is time to wake up.

The United States has been experiencing economic recession since early of the year 2008.  Latvia, Estonia and Lithuania are also at risk of facing economic recession for the next 12 months.  While Canada, Britain and Japan may  foresee a recession in their economy in the future.

With all this recession risks, ordinary people, could not help but wonder what exactly is an economic recession.

The economic cycle is that when an economy is strong, people are employed and earning.  There will be a great demand for outputs like food, electronics, vehicles and other products.  The production will increase until it exceeds the actual demand.  This would create a rise in prices or inflation.

Salary would then have difficulty accommodating the rising prices of products.  The prices will be too expensive for consumers, that they will stop buying or sales would not increase.  When the demand decreases, companies will lay off workers creating a large population of unemployed work force.

These are several signs of an economic recession. Decline in housing prices, decline in the stock market, and business expansion plans being put on hold are also signs of a recession.

According to the United States National Bureau of Economic Research, it is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

Economic recession is a contraction phase of the business cycle.  The common definition for recession is that there is a relative decline in a country’s gross domestic product or GDP.  Having a negative real economic growth for two or more successive quarters is also a telltale sign for economic recession.

Gross domestic product is the market value of all the products and services produced in a region or commonly, country, in a year.  GDP is the total output of the economy.  GDP is measured every quarter. Since the gross domestic product or the output is declining.  There is less need for people who are creating the product.  Firms and companies will sever their ties with several employees resulting to unemployment.

A severe or long recession could be an economic depression.  The difference between recession and depression is when the GDP is declining by 10%, that means what the economy is experiencing is already depression.  A short –lived recession is often called economic correction.

Based on the definition of the National Bureau of Economic Research (NBER),  recession can last “more than a few months.” Therefore, an official announcement that a country or region is experiencing recession can only be made after economic decline for six months.  Typically, a normal economic recession lasts for approximately one year.

Periodic recessions are part of a country’s or region’s economy.  According to Tom Harris (How Recession Works),  the United States has an economic pattern.  The United States economy will expand for six until ten years and then enter a recession for about six months or two years.  The start of the recession is called the peak, end of recession if trough. Meanwhile the period of time between two peaks or two recessions is called the business cycle.

NBER, a private, non profit research organization studies the American economy.  The Business Cycle Dating Committee maintains the chronology of business cycle.  They also decides whether the economy is in recession or expansion

Economists may argue with the definition of an economic recession.  They may even debate whether the United States, specifically is experiencing an economic downturn.  But it is not only the economists who can decide and identify an economic downfall, it is the ordinary people who can readily identify economic growth and  demise.

An economic situation in which a country’s gross domestic product or output is sustaining a negative growth for at least two consecutive quarters or six months is called an economic recession.  For the National Bureau of Economic Research (NBER), “recession is a significant decline in economic activity lasting more than a few months”.

Economic recession lasts for eleven months and may reach until two years.  While a recession that is short lived is called economic correction.  Meanwhile a sustained recession turns into a depression.

What causes recessions to happen?

There are complex reasons as well as simple reasons why economic recessions happen.  John Maynard Keynes states that there are “animal spirits” as driving elements for a recession.  “Animal spirits” could be confidence, uncertainty, and pessimism.  These “animal spirits” prevent objectivity and quantitative analysis.

An example where these “animal spirits” take over, is when consumers lose interest on products and outputs.  On the eve of an economic recession, there will be overproduction.  Supply will exceed the demands of products and goods.

This will push companies to increase prices and consumers will lose confidence and will be uncertain in purchasing products.  Until the event that consumers will stop buying. Another example for this element driving recession will be the psychological impact the events of the September 11 attacks on consumers and the people.

Some economists suggest that recession may not only be caused by events that have large or huge impact on the people.  Events that hurt particular companies or industries can also cause recession. Major innovations or change in a price of a major component needed in the completion of the product can have dramatic effects on some firms.  These may cause reduction of workers or production.

Overconsumption can also be a cause of recession.  Spending more that what is necessary may lead to recession and poverty.  And example will be the major fuss over the expenditure of the United States in the Iraq war.  Economists are saying that the United States should be careful with their consumption in the future.

Government economic policies can be used to avoid economic recession.  But failure to provide good economic policies can lead to recession.  There are some errors that can be made in economic policies.  There are some economic policies that can lead to a boom and bust.  This means that the economy is running in an unsustainable pace.  Inflation is increasing.

Another policy error is that the policymakers themselves are not attentive enough to see the increasing inflation and onset of recession.  Policymakers often times regard the onset of recession as just a slow economic growth and will correct themselves.  But failure to address this may lead to more economic disasters.

Economic recession is not just a United States issue.  The United Nations expressed an alarm that there might be a global economic recession as early as January 2008.  According to United Nations, world economic growth for 2008 is estimated to be on 3.4 percent, flowing from the down trend since 2006 (3.9 percent) and 2007 (3.7 percent).

The bursting of the housing market bubble of the United States and the unfolding credit crisis of other countries are some contributing factors for a global recession.  Currently, Latvia, Estonia and Lithuania are in risk of experiencing economic recession due to credit crisis.

To summarize, economic recession can be brought about by external as well as internal economic shocks and widening imbalances in the economy.  Numerous ways can cause recession.  Steps can be undertaken to avoid altogether this kind of economic scenario to happen.  But the most difficult part is to recover from the impacts of this economic turmoil.