Macroeconomics and Managerial Decision Making Essay
Macroeconomics and Managerial Decision Making
A recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters (Farnham, 2014). The United States began to experience this crisis in 2007 and continued to feel its effects in early 2012 (Farnham, 2014). “Employment growth during the current recovery has been weak compared with past recoveries. It has taken nearly five years since the beginning of the economic expansion for nonfarm employment to return to its pre-recession peak” (Laderman & Leduc, 2014, para 2). New businesses or “start-ups” grew very slowly during the recovery phase.
“Because start-ups generate jobs at a much faster pace than older businesses during recoveries, the account for a significant portion of job growth in the economy, even though their share of overall employment is quite small” (Laderman & Leduc, 2014, para 2). “Employment at start-ups was particularly hard-hit during the Great Recession, suffering a much steeper decline in growth compared with more mature businesses compared with start-ups in previous recessions” (Laderman & Leduc, 2014, para. 3).
Healthcare is also affected by economic changes. The results are usually seen later than some other areas as during periods of layoff employees are generally afforded a severance package that covers their insurance for a period of time (Bassett, 2008). “Surgeries are one part of the health care industry that is affected by the economy. From out-of-pocket procedures like Lasik to surgeries covered by insurance, many patients are more reluctant to undergo procedures that are more expensive than a regular doctor’s visit” (Bassett, 2008, p. 19). The life insurance industry also felt a change in their capital levels in 2008 (Cooper & Frank, 2011). “Best summarized 2008 as “among the worst in memory for life/annuity operating performance” (Cooper & Frank, 2011, p. 78). Puerto Rico has been in a multiyear recession beginning in 2006 and it anticipates it will continue through 2015 with a possible end in sight beginning in 2016 (Ruiz, 2015).
“Puerto Rico’s manufacturing sector has seen a sharp decline in investment since the expiration of tax-free credits in 2006, given by the US to corporations in the Commonwealth, which has been the main driver of the recession” (Ruiz, 2015, p. 1). Although the real estate market in Puerto Rico now appears to be becoming more attractive. “Puerto Rican real estate is becoming increasingly attractive, as the multiyear recession depressed price growth” (Ruiz, 2015, p. 2). A period of slow economic growth is not a good time to invest, expand, or start-up your business. Personal assets are an important part of the funding process for new businesses and the downturn of the housing market weakened the ability for many to invest, expand, or begin a young company (Laderman & Leduc, 2014).
Bassett, E. (2008). Health care sacrificed during economic slowdown. Fort Wayne Business Press, 19-19. Farnham, P.G. (2014). Economics for Managers 3rd ed. Upper Saddle River, NJ: Pearson Education. Laderman, L., & Leduc, S. (2014). Slow business start-ups and the job recovery. FRBSF Economic Letter, 20. Ruiz, G. (2015). Consumption weak despite a recovery in investment. Latin American Monitor, 1-2.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 26 September 2016
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