Economic recession can be defined as a prolonged decline in economic sector in a given country. In other words general business field in a country is affected. It is normally characterized by low productivity and investments as well as big percentage of unemployment. It is when gross domestic product (GDP) falls for three consecutive quarters. Its impact is perceived in different ways. There those who benefit and those who lose. It benefits an economy by addressing the inflation. Economic recession is as a result of money supply control in a country’s economy. Other contributing factors may include wars and oil prices. If the effects of economic recession are felt for a long period of time it can result to economic depression (Rasmus, 2010).
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Similarities and Dissimilarities
In 2008, USA the word’s richest country experienced economic recession. About 28 million people depended on government for survival. This included high level of poverty indicated by lack of food for many families. During this period, there was high inflation, unemployment due to retrenchment and housing problems. There was a downward pressure on the U.S dollar. The U.S economy was borrowing from other countries including China and Japan. Financial institutions fell down as a result of bad loans and bankruptcy. World’s stock market lost their values. Federal Reserve was blamed for this economic recession for not lowering interest rates. Oil price and other commodity prices rose due to high demand (Mishel , 2009).
1991 Economic recession in Sweden was caused by change in tax system to address the inflation. During this period Sweden experienced 5% GDP fall. Level of unemployment rose (Gustafsson and Johansson 2009).Japan’s lost decade saw its economy falling gradually. The earlier years had recorded high land values and very low rate leading to credit availability. This ended and led to stock market crash. Just like U.S, Japan’s economic recession was characterized by housing price increment, retrenchment and low level of consumer consumption. Banking field also experienced dept crisis. Consolidation was the best option and therefore Japan was left with four national banks. Capital investment was hindered due to heavy depts. Credit could not be offered. Unlike U.S.A, the impact of the recession was not very severe. Unemployment level was high although it was not termed as crisis. Japan’s lost decade was described as a liquidity trap. People emphasized on saving too much hence slowing down the economy (Richard, 2009)
Japanese and Swedish Government Economic Actions Employed To Fight Their Earlier Recessions
Japanese government employed programs and bank bailout. This was to enable the banks to lend and borrow money. The Central bank encouraged inflation which led to citizens spending. The Swedish government responded to the situation by ensuring low spending. It also enhanced reforms that would enable Sweden to compete in international economy. Improving its IT sector was another strategy of overcoming the crisis (Engström and Holmlund, 2009)
Economic Actions the U.S. Has Implemented To Fight the 2008 Recession
To fight recession, the U.S government refunded taxes in order to increase the citizen’s ability to spend. On the other hand, the Federal Reserve lowered interest rates. This was to motivate the economy. The U.S also relied on international competition and productivity. This was a strategy to tame prices and costs. This was also to enhance trade balance (Rodrigue, 2010).
The U.S actions in fighting the recession will be successful. This is because the citizens will have enough money to spend. They will no longer depend on government for survival. Unemployment and retrenchment will be addressed by people themselves hence maintaining position of the U.S dollar.
Engström, P. & Holmlund, B. (2009).Tax Evasion and Self-Employment In A Gustafsson, B. and Johansson, M. (2009). The welfare of Sweden’s old-age pensioners High Tax Country: Evidence from Sweden. Sweden: Free Press.
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In times of bust and boom from 1990. Sweden: Free Press.
Mishel , L. (2009). The State of Working America, 2008/2009. New York: Cornell University Press.
Rasmus, J. (2010). Epic Recession: Prelude to Global Depression. New York: Pluto Press. Recession. Cambridge University Press: London.
Richard, C. (2009).The Holy Grail of Macroeconomics: Lessons from Japan’s Great.
Rodrigue, T. (2010). The Code for Global Ethics: Ten Humanist Principles. London: Prometheus Books.