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Evaluate the strategies adopted by the government to help businesses to survive the recession

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Introduction

Evaluate the strategies adopted by the government to help businesses to survive the recession A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. A recession is preceded by several quarters of the slowing down of growth in GDP. An economy which grows over a period of time tends to slow down in growth as a part of the normal economic cycle. An economy typically expands for 6-10 years and tends to go into a recession for between about six months to 2 years. It normally takes place when consumers lose confidence in the growth of the economy and spend less. This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall partly due to negative sentement. Recessions are cyclical, as the economy works in peaks and troughs. When the economy became 'overheated', the recession was a natural way for certain aspects of the economy to 'cool off', or so to speak, e.g., inflation, the exchange rate, etc. When the US sub prime mortgage scandal was made public, a downturn was on its way. ...read more.

Middle

The scheme aims to target the demand side of the economy, increasing it by offering incentives to car buyers. Bailing out the banks Under the plan, at least �300bn (or just over, according to Robert Peston) would be made avaiable to banks under what is known as the Special Liquidity Scheme that was set up by the Bank of England earlier this year, as the Treasury will "extend and widen" its facilities for banks to stabilise the financial system. The Treasury is also making available �50bn to a select few banks, should they need to repair their balance sheet. The banks involved in the plan would be financed by the Government, who would take shares in the bank through so-called 'preference shares'. The Government is commited to help banks refinance short and medium term debt, to help restore confidence in the banks, increasing lending and spending and regenerating the economy. Thus, it is targeting the supply and demand sides of the economy. Government Youth Employment Schemes The Flexible New Deal is an employment scheme that aims to help one find employment if they've been unemployed and claiming Jobseeker's Allowance for 12 months or above. The aim of the FND is to help people find jobs, or get the training or work experience they need to help them find a job. ...read more.

Conclusion

It says the cut was the fairest way to get money into the economy because low-income households spend a larger share of their income on VAT than richer households do. (BBC News) The Scrappage Scheme has been very well received - ""The scheme has contributed to the 13.5% jump in car manufacturing and the first growth in new car registrations since April 2008." (11/08/09). Although, there has been criticism of the scheme for not including the ability of participants to get a discount on pre-owned cars. Critics of the bank bail-outs have noted that rescuing the banking system has cost the equivalent of more than �5,500 for every family in the country, an official audit has found. (Telegraph, 3/12/09). Others have said that there is simply no alternative for the banks, in order for them to override the financial turbulence. Regarding the Youth Employment Scheme - "We have both a moral obligation and an economic need to make sure that young people involuntarily without jobs aren't lost to work," Business Secretary Lord Mandelson told the BBC. He said that the campaign meant the government would help companies train young people and include mentoring and internships, depending on the age. But its success depended on the private sector, Lord Mandelson added. "The government cannot deliver these opportunities by itself," he said. More than 150 employers, including Microsoft and Pfizer, are said to be supporting the campaign, which has largely been a success. ...read more.

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