Hannah Ryan- Honorbound
Mr. Aparicio- PM class
When someone hears the word recession, most people consider it a bad time in the economy with many negative consequences. Despite some bad consequences that may occur from recessions, they can also bring positive effects that can result in new beginnings. Since the mid 1850’s, the United States has encountered thirty-two recessions which average a length of ten months for each one. 1 So, if the United States can produce and consume $14 trillion worth of stuff, and put most Americans to work doing it, why should we toss a bunch of people out of work and produce 5 percent less the following year?2
Recessions are important for growth and control in the economy. Recessions help get rid of excess supply, it helps balancing economic growth again, it creates buying opportunities as the markets readjust, and it changes consumer attitudes, especially involving investments.3 During the recession in 2008, Michael Hyatt gave ten benefits of the current recession which included thinning out competition, fostering out-of-the-box thinking, forcing tough decision-making, and accelerating change.4 As he points out, the economy may be not in complete control of one person to solve it with a quick fix, but one can control their mental focus during a period of recession to help get through it.
Now, even though there might not be one person that can change the economy in a day to help fix a recession, there are policies that can be put into place to help speed up the business cycle to jump start markets back up again. The Government has two tools at its disposal which are fiscal and monetary policy, and each policy has an objective to encourage consumers and businesses to begin spending and investing again so that the economy’s capacity no longer sits idle.5 Back to the beginning question in the first paragraph, recessions occur to restart the economy again for a fresh new beginning. The hard part about that is trying to have the supply meet the demand at a price and quantity people are happy with. For this to happen, workers may have to have wage cuts or get laid off. And the reason we would rather have people being laid off and produce five percent less than the year before is because sometimes it is unpreventable.6
Now back to the policies put in place by the Government, the power of fiscal policy can reduce the tax and increase government spending to get people back to work. Spending money can generate confidence that causes a recovery. 6 This expansionary method will hopefully help close the recessionary gap and shift the aggregate demand curve to the right.7 the only downside to this policy would be the longer length of time it takes to kick start this cycle of spending again.
Moreover, the majority opinion on a recession always follows with a negative connotation, but if we try hard to get past those parts we can come to realize that a recession is sometimes necessary to balance the economy back to normal again. We don’t realize that there is a small pattern to the recessions in the United States, and we need to come to understand that even though we might produce five percent less than the year before, our economy will start to recover as consumers keep with their regular habits.
1 Seabury, Chris. “Recession And Depression: They Aren’t So Bad.” Investopedia. September 28, 2015. Accessed June 23, 2017. http://www.investopedia.com/articles/economics/09/lessons-recessions-depressions.asp?lgl=myfinance-layout-no-ads.
2 Charles Wheelan and Burton G. Malkiel, Naked Economics (New York: W.W. Norton & Company, 2012), 200.
3 Seabury, Chris. “Recession And Depression: They Aren’t So Bad.” Investopedia. September 28, 2015. Accessed June 23, 2017. http://www.investopedia.com/articles/economics/09/lessons-recessions-depressions.asp?lgl=myfinance-layout-no-ads.
4 “10 Benefits of a Recession.” Michael Hyatt. Accessed June 23, 2017. https://michaelhyatt.com/10-benefits-of-a-recession.html.
5 Charles Wheelan and Burton G. Malkiel, Naked Economics (New York: W.W. Norton & Company, 2012), 206.
6 Charles Wheelan and Burton G. Malkiel, Naked Economics (New York: W.W. Norton & Company, 2012), 201-202.
7 Taylor, Blake. “Economics.fundamentalfinance.com.” Fiscal Policy – Macroeconomics. Accessed June 23, 2017. http://economics.fundamentalfinance.com/fiscal-policy.php.
image citation- Recession Proof Business Ideas – 13 Good Businesses to Start in a Bad Economy. (2017, April 10). Retrieved June 23, 2017, from http://www.nextnaijaentrepreneur.com/recession-proof-business-ideas/