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S cutting costs answer to recession?

Is cutting costs answer to recession?

Some people think... cutting costs an answer to recession...
Others may think... rather increase in consumption may help...
Which one you think...will really help...?


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It depends. If business cuts cost it usually means fewer jobs. Government cost cutting would helpful......don't hold your breath.

Increased consumption would help, but that is difficult with high unemployment.

There is no one solution to end the recession. I think that the recession will resolve itself after balance is restored in the economy. It will be a long time, but there are signs the worst is over.

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Cost cutting rather than being an answer to recession can infact debilitate the recessionary trend. In a recession austerity drives by individual consumers and firms driven sometimes by genuine fall in incomes and sometimes by the fear of a fall in income in the near future, lead to further contraction in economic activity. The government pumps money into the system and keeps borrowing costs low in a recessionary phase so that individuals and firms may also step up their consumption  and the demand thus generated helps to step up firms' expansion plans and in turn helps in employment generation and creates further demand for goods and services thus putting the economy back into a positive growth path. Once a recovery has been firmly established cost cutting becomes an important exercise so that unwarranted expenditures are cut out.

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