Summary
Summary What is Economic Recession?
- Course
- Institution
Economic Recession Definition Examples Causes of Recession Impact of Recession The measures/solutions to the economic downturn
[Show more]
Seller
Follow
reigntutorstc90
Content preview
What is an economic recession?In economics, a recession is defined as a decline in economic
growth. Specifically, it is when an economy experiences two
consecutive quarters of economic contraction. This happens when
GDP falls from the previous quarter.
So a recession occurs when GDP falls for two consecutive
quarters, but what is it made of? GDP consists of personal
consumption, business investment, government spending, and net
exports (exports - imports). Thus, a decline in any of these factors
could contribute to a recession.
Recession is often feared, which can actually happen on its own as
consumers and businesses spend less. Indeed, confidence in the
health of the economy in terms of jobs and consumer demand
suffers. Once the recession officially hits, many people fear for their
jobs, so consumer spending drops, which affects business sales
expectations.
A recession is classified as two consecutive quarters of economic
decline. The main contributing factor to an economic downturn is a
drop in demand – this can come from consumers, businesses,
governments or internationally due to lower exports. During a
, recession, people lose their jobs, businesses go bankrupt, the
stock market falls, and the exchange rate tends to fall.
Causes of recession
Economic output, or GDP, is made up of consumer spending,
business investment, government spending, and net exports.
Therefore, a recession will occur when one of these factors
declines significantly, outpacing the growth of the other
components. For example, a sharp decline in consumer spending
could be offset by growth in government spending, resulting in a
net effect on GDP that would be zero. A recession can result from
a decline in one component, two components, or all four
components of GDP. However, what are the factors that will cause
this and cause the recession?
1. Business/consumer trust
Business confidence could fall due to government policy, lower
consumer spending or rising interest rates, among other things.
This decline in confidence has an impact on investment (a
component of GDP) as businesses fear it will generate decent
returns. At the same time, consumer confidence is waning, likely
stemming from rising unemployment, weak economic growth and
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller reigntutorstc90. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.84. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now