Economic Recession - The Possible Effects on the Country and Government

When the economic recession sets in a country, it affects the industrial sectors, stock market, and even the day to day life of common man. The declining share market, increased rate of unemployment, companies hiring less people, layoffs, and price rise of oil, combines together to crash the economy of the country. It is at this time that the government leaders come to the rescue and slowly pull out the country from the staggering economy. Let’s analyze the possible effects that economic recession has on a country and the government:

The government or administration of a country generally gets the blame when an economic slowdown sets in. However, the government has the sole power to pull the country out from the state of economic recession.

Different economists have varied opinions about the role of government during an economic recession. Some economists believe that the recession has set in due to the improper aggregate demand of the economy, and they prefer the application of expansionary macroeconomic policy during economic recession. Keynesian economists on the other hand advocate an increased rate of government spending in order to stabilize the country’s economy. The supply side economists suggest a cut back on the tax, to support the business capital investment.

The government administrations take all possible steps to bring about stability in the market and help in softening the economic recession. The government usually passes new policies to help the common man by bringing down the prices of the essential items required for living. Government also tries to generate more employment opportunities for the people so that they can support their families.

When recession strikes globally, the economy of the entire world gets a severe setback. The effects in the economy of a country can differ from the developed to underdeveloped countries. However, government can lessen the effect of economic recession by devising policies by which the common man stays less affected by the credit crunch.