Economic Recession

1. ASHWANI KUMAR JAISWAL
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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
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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
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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’
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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.
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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
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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
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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
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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.
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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).
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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
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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.
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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.
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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.
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15. Thank You
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