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Recession

A recession is defined as a general slowdown in economic activity over an extended period of time where key economic indicators like GDP, employment, business profits, and inflation decline. During recessions, governments typically respond with expansionary policies like increasing the money supply and government spending. Recessions can be caused by events like financial crises, currency crises, underconsumption, overproduction, and wars. Effects of recessions include higher unemployment, bankruptcies, credit crunches, and deflation. Economists describe recessions as V-shaped, U-shaped, L-shaped, or W-shaped depending on the speed and trajectory of economic recovery. The 2008/2009 recession saw private consumption decline for the first time in

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49 views2 pages

Recession

A recession is defined as a general slowdown in economic activity over an extended period of time where key economic indicators like GDP, employment, business profits, and inflation decline. During recessions, governments typically respond with expansionary policies like increasing the money supply and government spending. Recessions can be caused by events like financial crises, currency crises, underconsumption, overproduction, and wars. Effects of recessions include higher unemployment, bankruptcies, credit crunches, and deflation. Economists describe recessions as V-shaped, U-shaped, L-shaped, or W-shaped depending on the speed and trajectory of economic recovery. The 2008/2009 recession saw private consumption decline for the first time in

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Recession.

In economics, a recession is a general slowdown in economic activity over a long period


of time, or a business cycle contraction.[1][2] During recessions, many macroeconomic
indicators vary in a similar way. Production as measured by Gross Domestic Product
(GDP), employment, investment spending, capacity utilization, household incomes,
business profits and inflation all fall during recessions; bankruptcies and the
unemployment rate rises.
Governments usually respond to recessions by adopting expansionary macroeconomic
policies, such as increasing money supply, increasing government spending and
decreasing taxation.

Causes of recessions

• Crisis theory
• Tendency of the rate of profit to fall
• Currency crisis
• Energy crisis
• War
• Underconsumption
• Overproduction
• Financial crisis

Effects of recessions

• Bankruptcies
• Credit crunches
• Deflation (or disinflation)
• Foreclosures
• Unemployment

A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to
as an economic depression, although some argue that their causes and cures can be
different.[7] As an informal shorthand, economists sometimes refer to different recession
shapes, such as V-shaped, U-shaped, L-shaped and W-shaped recessions.
In the US, V-shaped, or short-and-sharp contractions followed by rapid and sustained
recovery, occurred in 1954 and 1990-91; U-shaped (prolonged slump) in 1974-75, and
W-shaped, or double-dip recessions in 1949 and 1980-82. Japan’s 1993-94 recession was
U-shaped and its 8-out-of-9 quarters of contraction in 1997-99 can be described as L-
shaped. Korea, Hong Kong and South-east Asia experienced U-shaped recessions in
1997-98, although Thailand’s eight consecutive quarters of decline should be termed L-
shaped

The 2008/2009 recession is seeing private consumption fall for the first time in nearly
20 years. This indicates the depth and severity of the current recession. With
consumer confidence so low, recovery will take a long time. Consumers in the U.S. have
been hard hit by the current recession, with the value of their houses dropping and their
pension savings decimated on the stock market. Not only have consumers watched their
wealth being eroded – they are now fearing for their jobs as unemployment rises. [34]
A few other countries have seen the rate of growth of GDP decrease, generally attributed
to reduced liquidity, sector price inflation in food and energy, and the U.S. slowdown.
These include the United Kingdom, Ireland, Canada, Japan, China, India, New
Zealand and many countries within the EEA. In some, the recession has already been
confirmed by experts, while others are still waiting for the fourth quarter GDP growth
data to show two consecutive quarters of negative growth. India along with China is
experiencing an economic slowdown but not a recession

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