Economic Recession
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The document defines recessions and depressions, describing recessions as lasting 6-18 months and involving a decline in GDP over two consecutive quarters, while depressions are longer term declines in GDP that have more severe economic impacts. It discusses the types of recessions, including V-shaped, W-shaped, and L-shaped recessions defined by the pattern of economic decline and recovery. Causes of recessions include deflation, overinvestment, and reduced consumer confidence, while consequences are higher unemployment, falling incomes, and decreased tax revenue. The Great Recession of the late 2000s/early 2010s is examined as the most significant recession in recent decades, caused by the subprime mortgage crisis and housing market collapse in the
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Economic Recession
- 2. RECESSION • In economics, A recession is a business cycle contraction or slowdown. • According to NBER “A Significant decline in national output (GDP) lasting more than few months” • A Recession generally last from 6 to 18 months Phases of the business cycle 2
- 3. DEPRESSION RECESSION • Depression is a long- term GDP fall. • Has a severe impact on the economy in the longer run. • Recession is GDP fall among two consecutive quarters. • Results are short-run; hence impact can be managed. There have been a total of 33 Recessions recorded since 1854 but only one Great Depression of 1929 3
- 4. There is an old joke among economist that states: A Recession is when your neighbour loses his job A Depression is when you lose your job The difference between the two terms is not very well understood because there is no clearly defined line between ‘recession’ and ‘depression’ 4
- 5. TYPES OF RECESSION • The type and shape of recessions are distinctive. • The most commonly used terms are V-shaped, W-shaped and L-shaped recessions. 5
- 6. TYPES OF RECESSION V-SHAPED RECESSION • Normal shape for Recession. • The economy suffers a sharp decline followed by a strong recovery The Recession of 1953 in the United States 6
- 7. TYPES OF RECESSION W-SHAPED RECESSION • Double-Dip Recession • The economy falls into recession, recovers with a short period of growth, then falls back into recession before finally recovering The Early 1980s Recession in the United States 7
- 8. TYPES OF RECESSION L-SHAPED RECESSION • Most Severe Recession • The economy drop, is followed by a flat line The Japanese asset price bubble led to a Lost Decade in Japan 8
- 9. CAUSE OF RECESSION • DEFLATION • OVER INVESTMENT • OVER PRODUCTION • SATURATION IN DEMAND • HIGH INTEREST RATES • REDUCED CONSUMER CONFIDENCE IN INVESTMENTS • LACK OF INNOVATION • NON MONETARY CAUSE – STRIKE, DRAUGHT, WAR, FLOOD, etc. 10
- 10. CONSEQUENCES OF RECESSION • UNEMPLOYMENT • RISE IN POVERTY • FALLING REAL INCOMES • INCREASED INEQUALITY • LESS TAX REVENUE • FALL OF PRODUCTION GDP Unemployment Recession increases unemployment because in hard economic times when the production is slowing down, firms are less willing to hire workers The impact of a recession depends on how long it lasts and the depth of the fall in national output (GDP). 11
- 11. THE GREAT RECESSION • Period of Global Economic decline observed in world markets during the early 2010s • The scale and timing of the recession varied from country to country World map showing real GDP growth rates for 2009. *Countries in brown were in a recession 12
- 12. THE GREAT RECESSION CAUSE The primary cause of Great Recession was the SUBPRIME MORTGAGE CRISIS In Early 2000’s the housing market was booming In 2007 the housing bubble burst Demand Prices of Homes As a result the Housing market failed, banks collapsed, the economy went down and the great recession had officially begun. 13
- 13. THE GREAT RECESSION IMPACT The recession was not felt equally around the world particularly in North America, South America and Europe, fell into a definitive recession Recently developed economies suffered far less impact particularly China, India and Poland. United States • Significant Economic and Political impact. • GDP fell Down. • The number of persons with Jobs fell. • Loss in Real Estate and Stock Wealth. Europe • Banking System Crisis. • Unemployment rates in Spain, Greece, Italy, Ireland, Portugal, and the UK increased. • Decline in GDP. 14
- 14. THE GREAT RECESSION IMPACT Asia • Exports of many countries affected. • Some economies as Japan, Taiwan, Singapore and Hong Kong were into Recession. • India, Uzbekistan, China, and Iran experienced Slowing Growth, they did not enter recessions. Africa was not affected because it is not fully integrated in the world market. Australia avoided a technical recession after experiencing only one quarter of negative growth. 15
- 15. Thank You 16
Editor's Notes
- #4: Results are short-run; hence impact can be managed