Question

niready the electronics retailer Circuit City has filed for bankruptcy, and General Motors has said that it is in danger or running out of cash. If the consumer slump continues, there is a potential for a dangerous feedback loop, in which spending cuts and layoffs reinforce each other. What terminology do economists use to refer to this phenomenon?

Answer 1

2.

The great recession or economic down turn or economic slowdown are the terminologies used by the economists to explain the scenario. During recession, people start saving more and spend less. It cause AD to decrease and makes firm to reduce the supply. While doing so, they lay off people as well. These people again spend less and AD decreases. So, a chain of negative actions starts and recession takes place in the economy.