subject: What Happens During A Recession And How You Can Protect Your Financial Future [print this page] Economic Recession Economic Recession
Although everyone feels the effects of an economic recession, many do not know exactly what happens during a recession. Information like this is important for everyone to understand, not just the economists and stock brokers. Read on to learn about some of the major effects of recession.
Recession Defined
The typical way to define recession is to look at the Gross Domestic Product (GDP). The GDP is a major indicator of a country's overall economic health. In times of recession, the GDP declines at a steady rate for a period of at least a few months. When the GDP experiences losses of 10% or more which lasts for a few years, we call it an economic depression.
Recession Phase
These four indicators can offer us a greater understanding of what happens during a recession and why they happen. While it doesn't offer much comfort, a comprehensive understanding of a recession can help you make more informed financial decisions.
1. One of the first indicators is a dip or crash in the stock market which will cyclically repeat. Economists and brokers are constantly scouring market data for signs of an economic slow down. Because of this, the stock market responds long before the rest of us are aware there is a recession.
2. Banking and lending institutions will often lower interest rates before the recession hits. These industries also pay close attention to market predictors and will decrease rates in an effort to stimulate the economy.
3. Unemployment rates will experience a sharp and sustained rise. Underemployment and jobless (those who are still jobless but no longer eligible for unemployment benefits) rates will also rise drastically.
4. Once a recession has dug in its heels, there will usually be some government response. For example, our federal government has responded in part by extending unemployment benefits. Governments will often instate new legislation to provide rebates, tax cuts and refunds in an effort to stimulate the economy.
Surviving a Recession
The first step in survival is to educate yourself and understand exactly what happens during a recession. The next step is to determine what you are going to do to protect your financial future. There are many recession proof business and marketing systems available, including those that utilize the top tier approach. Continue to learn about, research and understand the economy and what your best options are in dealing with it.
