Dealing with Economic recession

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What is recession?

Economic recession is a period in which the gross domestic product which is the amount a country produces and sells declines for two or more consecutive financial quarters. In contrary, the finance of a country are not growing, they’re shrinking.

The temporary pain that is caused by recessions economically can result to the changes of an economy. This happen as a result of shift in the structure of the economy as vulnerable or obsolete organizations, industries, or technologies fail and are erased away; dramatic policy responses by government and monetary authorities, which can literally restructure the rules guiding each business or social and political changes as a result of widespread unemployment and economic distress.

A very good example is the great recession of 2006 to 2007. Poor and unsteady lending policies from the financial industry made many people to buy houses and properties they could not afford at that period of time because people thought the price of houses would continue to increase. In 2006, the story changes as the price of houses started to reduce.

Panic was caused due to the escalating foreclosure rate, many banks and other finance institute who had already aquire the mortgage-backed securities on the secondary market suddenly knew they were running at a loss.

Around August 2007, banks and financial institute are afraid to borrow each other because they did not want these toxic loans as collateral. It later led to the seven hundred billion dollars bailout from the government to help save some large financial institutions from bankruptcy. December 2008, employment was reducing faster than in the 2001 recession, and the United States results into a deep recession.

What causes economic recession?

Inflation rate is a major cause of economic recession. As the cost of purchasing goods or commodity decreases, the value of the currency tends to rise while as the cost of goods or commodity increases, the value of currency tends to fall. Inflation is mostly found among the undeveloped and developing countries especially Africa countries which seriously have impact on their currencies by depreciating and devaluing it in relation to other countries.

Scarcity also causes economic recession in the sense that if money is scarce in a country and its very hard to get, the currency tends to increase in value while if there is surplus production of money in a country and it is very easy to get, such country currency tends to depreciate in value.

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Although, it is not applicable to all countries because some civilized countries knows how to balance their currencies. For example, Nigeria with the scarcity and hardship of getting money, their currency Naira doesn't have value and keep depreciating every day because they don't know how to balance their economy with their currency.

Interest rate on loans also causes economic recession. The loan Interest rate enables country to generate more fund and thereby increase the rate of their currency as borrowers pay at an higher rate. The inverse of that happened to the lender's country. Since they refund at an higher rate, it make a loss for their country and tends to reduce the value of their currency.
Demand and supply are reasons for economic recession.

If request for a currency is too much and people make use of it a lot, the value of the currency tends to rise steadily as the country knows people have no other way and they have to satisfy the request of people. As the request increases, the supply also increases for civilized country like united state. United State currency, Dollar is one of the most known currency in the world because it is used in almost all countries.

Almost all cryprocurrencies transact only dollar in exchange for their coin. Also the online shopping like jumia also uses dollar as a means of transaction when it comes to international trading.

It doesn't stop there, most country also exchange their currency for dollar and safe it because of the steady increment in the value of their currency. All these are what enhance their currency for the regular increment .

But for upcoming countries like Nigeria, as the request increases, the supply decreases because they have limited production of their currency and the more they spend, the less they produce.
How To Deal With Economic Recession
Every country should try as much as possible to stay away from international loans.

Debts caused by loans as we know is a major factor of economic recession. All country that are wishing to take loan as a result of the problems and challenges they are facing should try as much as possible to make plans before requesting for the loan. They should negotiate on the total amount they need, the money they have in ground and the actual amount they are planning to borrow, they should set a plan for refund, the mode of returning the loan and the specific time to refund the loan completely. All this should be consider well before requesting for an international loan in order to avoid economic recession because any slight mistake or change of plan might have changes on their currency.

Production should also be equal in order to stop economic recession. There should not be money scarcity likewise surplus of money the two will affect the currency of money if not balanced well. It is not easy to equalize the scarcity of money and surplus of money equally but the range should not be too much and too obvious. If this is considered, economic recession will definitely minimize.

Inflation rate should be regulated or minimize in a country in order to minimize economic recession in such country. The cost of goods should remain the same regularly. If there is any reason for the change in the price, it should increase or decrease in such a way that the new price will not inflate the money of such country. For instance, if a pair of socks cost about 10 US dollars in the united state if there will be increase or decrease in the price of the shoe, it should be considerate wlike 0.5 to 1 dollar increment or decrement.

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