Friday, February 01, 2008

What is Recession?

I come across most of folks ask me about what is recession and how it affects the country's economy. It gives me chance to bring some good resources into this blog. I have collected excerpts from few sites and posting here.

The official definition of recession is when GDP growth is negative for consecutive two quarters or more. However, you can feel like you are in a recession before it has officially started because it is usually preceded by several quarters of slowing but positive growth. It feels like a recession when GDP growth slows, businesses stop expanding, employment falls, unemployment rises, and housing prices decline.

For example, the stock market crash and subsequent economic downturn in 2000 was not a recession in technical terms. GDP growth was negative in Q3 2000, Q1 2001, and Q3 2001. However, anyone who lived through it knows that it felt like a recession during all that time. And in fact, GDP growth did not reach over 3% until Q3 2003.

A recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.

An alternative, less accepted definition of recession is a downward trend in the rate of actual GDP growth as promoted by the business-cycle dating committee of the National Bureau of Economic Research.[1] That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression.

When the nation is in the early part of a recession, nobody knows for sure if it is actually a recession or not. The economy might turn around the next day, which would mean the contraction was just a temporary decrease in activity along a mostly upward track. Economists don't know if the economy is in recession until they can gather data over an extended period of time -- typically six months or more.

There is no strict definition for recession. Different people consider different factors when making the assessment.

Some economists and journalists define a recession as two consecutive quarters (three-month financial periods in the year) in which the gross domestic product (GDP) decreases.

In the United States, the economy follows a somewhat regular pattern of expansion and contraction. The economy will typically expand steadily for six to 10 years and then enter a recession for six months to two years. The point where the recession begins is known as a peak, and the point where it ends as known as a trough. Following the trough, the economy expands again toward another peak. Economists call the period of time between two peaks a business cycle.


Unknown said...

In what way it affects India?

Dhruv Lavania said...

all that you have have written is a piece of shit,ctrl c and ctrl v is not what u meant to do be original man

Starcire said...

The best way I found out to avoid a recession is not to participate in it. Go to or There is an interesting article published on each of these blogs.