Gross Domestic Product (GDP) and Recession
What is “Gross Domestic Product” (GDP), and how is it determined each month? What does the term “Recession” mean and how do we know when one occurs? How does government intervene to move the economy out of a recession?
Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is the market value of goods and service produced by a country. It is determined by:
GDP = Consumption
+ Government Purchase
+ Net Exports
A recession is described as a reduction in GDP for two consecutive quarters. Usually a country, state, city, county, or community can be in a recession for six months before National Bureau of Economic Research (NBER) declares one. How to survive a recession would be a significant impact on the economy, extremely high oil prices, natural disasters, overheated markets, or collapse of an industry or market.
Government intervention in the markets attains two goals: Social efficiency and equity. This is achieved where the marginal benefits of a society for production or consumption are equal to the marginal costs of production or consumption. The government also intervenes to correct problems like inflation.
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