RecessionsOn November 26, 2001, the news media announced the United States was officially

Recessions

On November 26, 2001, the news media announced the United States was officially in a recession, and had been since March. To most Americans, this wasn't all that surprising: Rising unemployment and a weak stock market had been in the news for months.

Money Makes the World Go Round

A recession is a prolonged period of time when a nation's economy is slowing down, or contracting; Such a slowdown is characterized by a number of different trends, including:

- People buying less stuff

- Decrease in factory production

- Growing unemployment

- Slump in personal income

- An unhealthy stock market

- By the conventional definition, this slow-down has to continue for at least six months to be considered a recession.

This definition really raises more questions than it answers. What does it mean for the economy to slow down？ Why does this happen？ And what exactly is "the economy"？

People talk about the U.S. economy as an independent entity, but it is actually the result of millions of people's actions. You can understand the basic idea of the connection between people's actions and the overall economy by looking at only a few basic concepts: producers, consumers, markets, supply and demand.

Producers and Consumers

Broadly speaking, a nation's economy is the production and consumption of goods and services in that nation. Anybody producing or consuming things in a country plays some role in the economy.

Production and consumption are intertwined. In order for people to consume things, someone has to produce those things. And in order to produce things, you need to consume things(you need to consume natural resources and people's labor, for example).

Markets

In a market economy, or a modified market economy such as the U.S. economy, production and consumption are connected in various "markets." A market is simply a place where consumers can go to buy things from producers and producers can go to sell things to consumers.

A grocery store is an example of a physical market. People who want to consume food go to the grocery store and buy it from producers through a series of middlemen. The store itself is one of the middlemen, and there are usually others along the way(distribution companies, for example). The labor market is a more abstract sort of market. In this market, businesses who want to consume work pay people to produce labor. In the stock market, consumers and producers buy and sell percentages of ownership of companies.

As you can see, almost everybody is both a producer and a consumer acting in more than one market. If you have a job, you are a producer of labor. Whenever you go shopping, you are a consumer of goods.

Supply and Demand

The ultimate goal of producers is to make money—to bring in more money than they spent producing the product. Consumers may want to satisfy their wants and needs by buying products, or they may buy products in order to make money(by reselling the products or by using the products to produce other products). In any case, consumers generally want to pay as little for goods and services as they can.

In a market, the actions of producers and consumers determine the value of goods and services. Producers are the ones who actually set prices, but they do so based on the behavior. of consumers. If nobody buys a product at a particular price, the producer knows the price is too high. If some consumers buy it, but not enough to buy everything produced, producers must either decrease the price or decrease the supply. The willingness of consumers to pay for products is known as demand. Even if there is constant high demand for a product(toilet paper, for example), individual producers need to keep the price down or consumers will just buy

A．Y

B．N

C．NG