Thesis: How an Economic Recession can be Measured

Sample Thesis Paper

Economists usually measure a recession by a fall of the GDP during two consecutive quarters. However it is more apt to define it as a time when the growth falls significantly below its potential rate. The key statistics that measure depression are the GDP and unemployment rate. The first quarter 2009 GDP report indicates a fall of 6.1% with the unemployment rate at 8.9% with more prospective unemployment soon to follow (Bureau of Economic Analysis, 2009).

The basic depression model is also known as the Keynesian model. This model has three key assumptions began with prices remaining rigid despite the economic downturn. The second was one of effective demand meaning that consumption expenditures were based on disposable income. The third was the saving and investment determinants which presumed that factors which increase the interest also affect the saving and investment. With household saving and business investment based on income and profit respectively. Thus if consumption is lower business trends will decrease due to lower expectations of profits. Decreasing investment cause a net decrease in capital (Allgoewer, 2002).

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