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Global Recession Effects on Emerging Economies

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The global recession is an economic issue that currently prevails over all others. With the recession, the economic activities of a country go downhill over a period of time in a business cycle. A business cycle is the measure of economy-wide economic activity over several months or years and is calculated through the fluctuations in the production and incomes generated within the economy over that period of time. During recession demand, business profits, capacity utilization, investment spending, employment, Gross Domestic Product (GDP), household incomes as well as budgeting are affected negatively. With the slowdown in the global economy, all stakeholders are affected.

Multinational and international industries, local industries, government establishments and the consumers themselves are affected by the changes in the economic status of the country. Global recession also has a great impact on the value of local and international currencies, generally affecting end-users and households. As a result, the purchasing power of the consumers goes down. For the last few decades, most countries of the world have opened their economies and have accepted that market economy is the best for global trade and prosperity.

The markets are now driven by demand and every effort is made to boost demand by lowering production costs and generating additional employment which in turn creates new consumers. The economy’ s output of goods and services is traditionally divided into four components: consumption, investment, net exports and government purchases. Any expansion in demand has to come from one of these four. However, the current recession is affecting demand and each of the above four components and is responsible for lowering demand. The current global recession has affected both the developed and developing countries but with different results.

This is in contrast to all previous recessions. The developed economies, both western and eastern, have suffered in terms of loss of business assets and markets, larger unemployment and erosion of their GDP.

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