Chapter 32, Problem 3P

To determine

Concept Introduction:

Unemployment rate: It is defined as the rate of unemployed people in an economy. All those people who are willing to work at given wages but cannot find jobs are known as the unemployed. It is the ratio of unemployed to that of labor force in the economy.

Financial Crisis: When there is an excessive loss in the nominal value of assets then the situation is termed as financial crisis. The major financial crisis after the Great Depression of 1920 occurred in 2008.

Banking Crisis: It is generally a crisis in the banking sector that causes recession in the economy. Recession in economy is caused by banking crisis. During these periods some of the major banks of economy go bankrupt. As a result, government intervention is required. Such crisis leads to huge unemployment and decrease in the real GDP.

Recession: Every economy faces different business cycles at different points of time. Recession is one such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.
The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for a longer duration it is known as depression.