Professional Documents
Culture Documents
Producer Price
Consumer Price
Usually, we think;
Demand = Quantity
But, here Demand = Price;
This is because,
Price decides the Quantity of Sales;
Competitive Price = More Demand;
In competitive Price = Less Demand;
C] What is Recession?
Recession is the economy shrinking for two
consecutive quarters (=6 months) with a
decrease in the GDP (=Gross Domestic Product)
GDP = Value of all the reported goods and services
produced by the people operating in the country
GDP = MONEY VALUE OF {C + I + G + (X M)}
C = Consumables, I = Gross Investments, G = Government Spending,
X = Exports, M = Imports
RECESSION
= WHEN YOUR NEIGHBOR LOSES HIS JOB
DEPRESSION
= WHEN YOU LOSE YOUR JOB
E1] OVER
PRODUCTION
E2] LOW
CONFIDENCE
LEVEL
E1] OVER
PRODUCTION
PSEUDO DEMAND
ACTUAL NEED WAS
NOT THERE;
WRONG PROJECTIONS
COMPANIES
PRODUCED
MORE
Consumers
arenot
fearing
they may
Producers do
stockthat
materials,
they
lose
theirtheir
jobs;
So, they have
reduce
productions,
getsless
into the
confidence
to spend
money
and buy
cost reduction
activities,
worried
about
goods;
This will result
the profitability,
etcin reduction
in demand in the market; Consumers
start saving money instead of spending
money; This is a downward spiral in
the economy;
CONTINUED
IN NEXT SLIDE
Low or No income to
spend and buy goods
So, you can see how the hit on Airline and Hotel
industries can affect Un-related industries
in the end;
One industry can hit many other industries when the
confidence level of millions of consumers & producers
drastically comes down;
Producers;
Consumers;
Can decide to
buy or not;
Both Producers and Consumers are free to act; Not a forced action
Monetary Policies
(By Govt.)
(By RBI)
RBI manipulates
the available supply of
money in the country
More money
available for
spending
2] More Spending
by Govt. to
create jobs
Individuals get
salary and spend
money
3] Automatic
fiscal policy;
Unemployment
Insurance
Some income to
unemployed
people to spend
Demand picks
up; Market
can recover;
1] Reduce reserve
ratio
More money
available for bank
to give loans
Demand picks
up; Market
can recover;
1] Reduce reserve
ratio
More money
available for bank
to give loans
2] Lower the
interest rates
Individuals take
more loan
Demand picks
up; Market
can recover;
1] Reduce reserve
ratio
More money
available for bank
to give loans
2] Lower the
interest rates
Individuals take
more loan
It becomes an
income to Govt.
to inject money
into the market
Demand picks
up; Market
can recover;
I] WOW!!!!!!!!
RBIs Power or Governments Power is double-edged
sword; Sometimes, their policies to recover from recession
can be counter-productive and it may further worsen the
situation;
If we advise our people to save money, then, the multiplication effect is that
the demand will not pickup and recession will continue; Very peculiar!!!!! But, I
am not misguiding you; Just think from a macro level, if everybody in the
country stops spending, what will happen?
I] WOW!!!!!!!!
Most of the
developing
Economies like China,
India;
Currently,
Slow Down
Stage; Not yet
in Recession
GDP Growth
Rate Down; But,
Still expected to be
Around 6% in India
Currently,
in Recession
GDP Growth
Rate Negative;