World Recession Causes

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World Recession Causes

  1. 1. World Recession Causes & Effects Student Lahore School of Economics
  2. 2. <ul><li>What is Economic Recession? </li></ul><ul><li>Economic Correction </li></ul><ul><li>Economic Depression </li></ul>
  3. 3. CAUSES <ul><li>Fall in Consumer Spending </li></ul><ul><li>Food Inflation </li></ul><ul><li>Prices rise of general commodities by 75 % </li></ul><ul><li>Fall in consumption leads to a fall in GDP growth rate </li></ul>
  4. 4. <ul><li>Expansionary Monetary policy </li></ul><ul><li>Reduction in interest rates </li></ul><ul><li>Loose monetary tools implementation such as </li></ul><ul><ul><li>Cash reserve ratio </li></ul></ul><ul><ul><li>Discount rate </li></ul></ul><ul><li>Increased Borrowing for non-productive investments </li></ul>
  5. 5. <ul><li>Real Property Bubble </li></ul><ul><li>Increased investment in the property </li></ul><ul><li>Increase in prices of property </li></ul><ul><li>Increase in speculation </li></ul><ul><li>The speculators started taking out their investment from real market </li></ul><ul><li>Crash in real property business </li></ul><ul><li>Borrowers mainly affected </li></ul>
  6. 7. <ul><li>Stock Market Bubble </li></ul><ul><li>Increase investment in the market </li></ul><ul><li>Too much speculation </li></ul><ul><li>Large stock holders took out their money after earning massive profits </li></ul><ul><li>Crash in Stock market </li></ul><ul><li>Small stock holders mainly affected </li></ul>
  7. 8. <ul><li>Sub-Prime Mortgage Crisis </li></ul><ul><li>Too much lending </li></ul><ul><li>Lower interest rates </li></ul><ul><li>Poor lending policies </li></ul><ul><li>Borrowers with poor credit rating </li></ul><ul><li>Over evaluation of mortgage property </li></ul>
  8. 9. Credit Crunch <ul><li>Lower interest rate </li></ul><ul><li>Too much lending </li></ul><ul><li>Increased number of defaulters </li></ul><ul><li>Liquidity crisis </li></ul><ul><li>Closure of major banks </li></ul>
  9. 10. Oil Price Crises <ul><li>Sudden increase in price of oil </li></ul><ul><li>Rise in cost of production </li></ul><ul><li>Inflationary pressure develops </li></ul><ul><li>Consumer spending fell </li></ul><ul><li>Production decreased </li></ul><ul><li>Slowdown in GDP growth rate </li></ul>

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