Recession APA

This paper talks about the United States Recession.

The first part of the paper is the introduction to the topic. The second part of the paper is the explanation of the recession. The third part of the paper discusses the different reasons why the US is under recession and the last part is the conclusion of the paper. You may be scared of the fact that the US is already undergoing recession.

Economists had stated that the United States is already facing recession in the early months of this year. Well, there has been proof that the job growth had fallen during the last three months of the year 2005.February have 200,000 jobs, however in the month of May it had been reduced to 75,000. Aside from the jobs, the private household indebtedness since 2000 is as high as 70%. There is also an increase in real disposable personal income of 12%.

These evidences show that the country is already in the trend of recession. Thinking about these evidences, you may ask what seems to be America’s problem. Most of you could think that it is impossible for America to face recession because the country is considered as one of the richest in the world.Well, this shows that any country can face recession. You may be curious about how and what are the different reasons why the US is facing recession right now.

Dr. Kurt Richebacher had named five reasons why the recession is happening. These are the low consumer spending, credit expansion, debt trap and house price crash. I would be discussing these five reasons one by one. America has been facing recession because there has been a lowering trend of consumer spending .

The government is using GDP as another measure of recession.In a website investors. com, recession is defined as a period of economic decline. When the GDP declines for two or more consecutive quarters this is the signal that recession is being experienced already.

In the year 2006, economists focus on the record rate of 5. 2% which is considered as high. However, looking at it closely, GDP is based on averages. The true increase prior to the quarter had been only 1.

3%. Further analysis show that the first five months of the year 2006 had broken down the consumer spending boom in the late 2005.The sequence of monthly data would show that a thorough analysis of the consumer spending trend. The consumer spending boom had resulted in to a large overhang for the next quarter.

Early 2006, there have been an increase of 0. 1% before inflation. It had been estimated that real spending is lowering. The high consumer spending in the late 2005 had resulted to a steep decline of the consumer trend.

Honestly, economics is pretty hard to understand and it is important to know the basic principles before concluding anything.Another reason for the US going to recession is the credit expansion. The way of life in America can be considered as more on the use of credit card and debt intensive. The more the credit the less would be the economic activity.

People would definitely stop buying something if they knew that they have a very big debt. Logically, people would choose to save money than buy another thing again and add on their debt. Economic activity is important to stimulate the producers or manufacturers. Connected with credit expansion, the people in America could have already experienced the debt trap.

The Debt Trap is another reason for the recession. The income of the people are stagnant, however, prices on commodities and assets are increasing constantly. There would come a time that people would not be able to pay for the assets and commodities that they need because of the lack of income. People would be forced to get money through debt. This would then force the people to be inside the Debt Trap.

The last reason that Dr. Richebacher had named is House Price Crashing. House Price Crashes when the price of the house is very high. This is happening lately.The high prices had caused people not to buy the houses.

In return, house price crashing happens. There has also been a fast cuts on interest rate and a massive government deficit spending succeeded in containing the recession. The phoney "wealth effects" derived from the escalating housing bubble became the key source of demand creation in the United States. But the unpleasant longer-term result of the new policies was an unusually weak and lopsided economic recovery, particularly seeing drastic shortfalls in employment and income growth.As a conclusion, the US is in the recession stage because of the following reasons stated above. People cannot change what is happening because the reasons stated above are not the only contributing factors to the recession of the country.

There are many other possible reasons for the recession. Being able to identify that the US is already in its recession, people must make preparations and adjust their lifestyles so that they would not suffer the effects. Recession is considered as the downfall of an economy that is why it seems that people are smarter and adjust in order to survive.Referencehttp://www.investorwords.com/4086/recession.html