A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.
Great Recession of 2008
The U.S. 2008 recession was felt in nearly every country’s economy worldwide. As inflation increased and various other factors began to fail the United States economic system a global recession began to take place. The U.S. began to face hardships such as high unemployment, bank failure, rising energy costs, housing and auto bubbles that ruptured into a global crisis.
Although, much of the media focus was initially known as the so-called, “super power” U.S., now as more attention is being shifted to Japan the world’s number two economy and other nations financial markets. The global downturn had the potential to affect exports which the Sweden market experienced because of their high percentage of contributed over half to their GDP. However, during the next few pages we will elaborate further on the how the U.S. 2008 recession is dissimilar and parallel with that of Japan and Sweden’s. Also, listed will be those economic actions implemented that were effective or unsuccessful in fighting the recession.
Similarities of U.S. Recession and Other Nations
Japan and Sweden both had similar attributes and causes of the economic global downturn with those of the United States. •
Japan is the second largest economy in the world. However, experiencing two straight quarters of declining GDP Japan followed the U.S. into a massive recession. As the U.S. began to experience low consumer confidence and demand, Japan’s corporate powerhouses such as Toyota, Honda, and even Sony profits took a dive. The nation’s export driven economy watched overall global demand slow down especially since the U.S. is one of Japan’s biggest customers for exporting goods. According to CNN Money, Stocks in Japan and the United States have been equally hard hit, falling 42% and 33% respectively (CNN Money, 2010). Both Japan and the U.S. dollar weakness helped to hinder economic recovery. Slow growth in Japanese bank loans had added to the similarities as the U.S. did. “Falling home and stock prices reduced consumer wealth. Feeling poorer, consumers were less willing to buy goods and services at the prevailing price level. This aggregate demand led to a drop in equilibrium GDP” (Schiller, p.167). As the known business cycle of alternating periods of economic growth and contraction, the United States financial sector affected the financial systems through its exposure to foreign financial assets with high level risks. Thus, the downward slope of the aggregate demand curve is reinforced by changes in imports and exports (Schiller, 2010).
Great Recession of 2008
Sweden has more similarities with the U.S. recession than that of Japan. Both the United States and Sweden are mixed economies, and both experienced the housing crisis with helped lead to one of the worst recessions on record that has been felt globally. In Sweden the residential price falls, and a significant decline in property sales which resulted in overall slowdown of construction activity. The 2008 great recession is global and Sweden was not immune. As consumers began to spend less, other people and businesses aren’t earning any money, which eventually led to high unemployment rates...
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