•5 years
What is a recession?
Recently, reading financial articles, I still see that the editors are using the word recession. Could someone please explain to me what exactly it is? What are the differences between a recession and a crisis, because I can't get it very much. Thanks
Recently, reading financial articles, I still see that the editors are using the word recession. Could someone please explain to me what exactly it is? What are the differences between a recession and a crisis, because I can't get it very much. Thanks
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A recession is part of the economic (business) cycle. This is a natural, although sometimes difficult to survive, phenomenon.
By way of explanation, I will add a few words about cycles. The business cycle is the phenomenon of economic fluctuations occurring in the economy in periods of several years with a simultaneous long-term trend of economic growth.
Business cycles can be divided into four basic phases:
- crisis (or recession),
- depression (or the bottom of the crisis),
- economic recovery,
- economic boom (high economic situation).
Each of the phases is characterized by slightly different phenomena, so based on their occurrence and intensity, one can try to recognize the beginning and end of a given stage. But I won't go into that because you're asking about the recession itself.
In the crisis phase, we have an economic collapse. There is a decrease in production and an increase in unemployment, and the prices of products and services slow down or fall. A general decline in demand can be observed, including the abandonment of construction contracts, and banks limit the granting of investment loans and force them to repay existing liabilities. Stock prices in the stock market also fall. There is a slowdown in growth or even a reduction in salaries and other incomes of the society. The longer the recession, the more problems and bankruptcies of companies from various industries. Some are losing their wages, others are losing their jobs, and society is getting poorer. We earn less, so we spend less, and thus consumption drops significantly.
A natural consequence is also the fact that due to the decrease in income, we have lower creditworthiness, so only a few get loans in recession.
Such an economic collapse can have various causes. One of the most common is bad monetary policy and excessive state interference in the economy, especially in the financial system. Disasters and wars can also indirectly lead to recession.
Do crisis and recession mean the same thing? Yes, but with one important caveat. It is important to remember that while all recessions are crises, not all crises are recessions. In order for us to be able to talk about a recession in the economy, the occurrence of the factors I mentioned earlier must be taken into account. The crisis itself may appear, for example, in the real estate industry or on the commodity market, but if averted early enough, it will not turn into a recession.
In the last three years, we can see with our own eyes how a combination of unfavorable circumstances (first a pandemic, and now the outbreak of war in Ukraine and problems with the supply of necessary raw materials and products) has deteriorated the condition of many economies. I must add, however, that if it had not been for earlier wrong decisions of the rulers, who cared more about economic growth than a stable, balanced state budget, the consequences would not have been so disastrous. The old adage is that you should prepare for bad times when it's good, because there's no time for that later.
By way of explanation, I will add a few words about cycles. The business cycle is the phenomenon of economic fluctuations occurring in the economy in periods of several years with a simultaneous long-term trend of economic growth.
Business cycles can be divided into four basic phases:
- crisis (or recession),
- depression (or the bottom of the crisis),
- economic recovery,
- economic boom (high economic situation).
Each of the phases is characterized by slightly different phenomena, so based on their occurrence and intensity, one can try to recognize the beginning and end of a given stage. But I won't go into that because you're asking about the recession itself.
In the crisis phase, we have an economic collapse. There is a decrease in production and an increase in unemployment, and the prices of products and services slow down or fall. A general decline in demand can be observed, including the abandonment of construction contracts, and banks limit the granting of investment loans and force them to repay existing liabilities. Stock prices in the stock market also fall. There is a slowdown in growth or even a reduction in salaries and other incomes of the society. The longer the recession, the more problems and bankruptcies of companies from various industries. Some are losing their wages, others are losing their jobs, and society is getting poorer. We earn less, so we spend less, and thus consumption drops significantly.
A natural consequence is also the fact that due to the decrease in income, we have lower creditworthiness, so only a few get loans in recession.
Such an economic collapse can have various causes. One of the most common is bad monetary policy and excessive state interference in the economy, especially in the financial system. Disasters and wars can also indirectly lead to recession.
Do crisis and recession mean the same thing? Yes, but with one important caveat. It is important to remember that while all recessions are crises, not all crises are recessions. In order for us to be able to talk about a recession in the economy, the occurrence of the factors I mentioned earlier must be taken into account. The crisis itself may appear, for example, in the real estate industry or on the commodity market, but if averted early enough, it will not turn into a recession.
In the last three years, we can see with our own eyes how a combination of unfavorable circumstances (first a pandemic, and now the outbreak of war in Ukraine and problems with the supply of necessary raw materials and products) has deteriorated the condition of many economies. I must add, however, that if it had not been for earlier wrong decisions of the rulers, who cared more about economic growth than a stable, balanced state budget, the consequences would not have been so disastrous. The old adage is that you should prepare for bad times when it's good, because there's no time for that later.
A recession is part of the economic (business) cycle. This is a natural, although sometimes difficult to survive, phenomenon.
By way of explanation, I will add a few words about cycles. The business cycle is the phenomenon of economic fluctuations occurring in the economy in periods of several years with a simultaneous long-term trend of economic growth.
Business cycles can be divided into four basic phases:
- crisis (or recession),
- depression (or the bottom of the crisis),
- economic recovery,
- economic boom (high economic situation).
Each of the phases is characterized by slightly different phenomena, so based on their occurrence and intensity, one can try to recognize the beginning and end of a given stage. But I won't go into that because you're asking about the recession itself.
In the crisis phase, we have an economic collapse. There is a decrease in production and an increase in unemployment, and the prices of products and services slow down or fall. A general decline in demand can be observed, including the abandonment of construction contracts, and banks limit the granting of investment loans and force them to repay existing liabilities. Stock prices in the stock market also fall. There is a slowdown in growth or even a reduction in salaries and other incomes of the society. The longer the recession, the more problems and bankruptcies of companies from various industries. Some are losing their wages, others are losing their jobs, and society is getting poorer. We earn less, so we spend less, and thus consumption drops significantly.
A natural consequence is also the fact that due to the decrease in income, we have lower creditworthiness, so only a few get loans in recession.
Such an economic collapse can have various causes. One of the most common is bad monetary policy and excessive state interference in the economy, especially in the financial system. Disasters and wars can also indirectly lead to recession.
Do crisis and recession mean the same thing? Yes, but with one important caveat. It is important to remember that while all recessions are crises, not all crises are recessions. In order for us to be able to talk about a recession in the economy, the occurrence of the factors I mentioned earlier must be taken into account. The crisis itself may appear, for example, in the real estate industry or on the commodity market, but if averted early enough, it will not turn into a recession.
In the last three years, we can see with our own eyes how a combination of unfavorable circumstances (first a pandemic, and now the outbreak of war in Ukraine and problems with the supply of necessary raw materials and products) has deteriorated the condition of many economies. I must add, however, that if it had not been for earlier wrong decisions of the rulers, who cared more about economic growth than a stable, balanced state budget, the consequences would not have been so disastrous. The old adage is that you should prepare for bad times when it's good, because there's no time for that later.
By way of explanation, I will add a few words about cycles. The business cycle is the phenomenon of economic fluctuations occurring in the economy in periods of several years with a simultaneous long-term trend of economic growth.
Business cycles can be divided into four basic phases:
- crisis (or recession),
- depression (or the bottom of the crisis),
- economic recovery,
- economic boom (high economic situation).
Each of the phases is characterized by slightly different phenomena, so based on their occurrence and intensity, one can try to recognize the beginning and end of a given stage. But I won't go into that because you're asking about the recession itself.
In the crisis phase, we have an economic collapse. There is a decrease in production and an increase in unemployment, and the prices of products and services slow down or fall. A general decline in demand can be observed, including the abandonment of construction contracts, and banks limit the granting of investment loans and force them to repay existing liabilities. Stock prices in the stock market also fall. There is a slowdown in growth or even a reduction in salaries and other incomes of the society. The longer the recession, the more problems and bankruptcies of companies from various industries. Some are losing their wages, others are losing their jobs, and society is getting poorer. We earn less, so we spend less, and thus consumption drops significantly.
A natural consequence is also the fact that due to the decrease in income, we have lower creditworthiness, so only a few get loans in recession.
Such an economic collapse can have various causes. One of the most common is bad monetary policy and excessive state interference in the economy, especially in the financial system. Disasters and wars can also indirectly lead to recession.
Do crisis and recession mean the same thing? Yes, but with one important caveat. It is important to remember that while all recessions are crises, not all crises are recessions. In order for us to be able to talk about a recession in the economy, the occurrence of the factors I mentioned earlier must be taken into account. The crisis itself may appear, for example, in the real estate industry or on the commodity market, but if averted early enough, it will not turn into a recession.
In the last three years, we can see with our own eyes how a combination of unfavorable circumstances (first a pandemic, and now the outbreak of war in Ukraine and problems with the supply of necessary raw materials and products) has deteriorated the condition of many economies. I must add, however, that if it had not been for earlier wrong decisions of the rulers, who cared more about economic growth than a stable, balanced state budget, the consequences would not have been so disastrous. The old adage is that you should prepare for bad times when it's good, because there's no time for that later.
Machine translated
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A recession is a significant decline in economic activity that lasts more than a few months. The following five economic indicators most commonly fall during a recession: real gross domestic product, income, employment, manufacturing, and retail sales.
People often say that a recession is when the GDP growth rate is negative for two or more quarters in a row. However, a recession could start before the end of quarterly GDP reports. Therefore, the National Economic Information Bureau measures the other four factors.
A recession is a significant decline in economic activity that lasts more than a few months. The following five economic indicators most commonly fall during a recession: real gross domestic product, income, employment, manufacturing, and retail sales.
People often say that a recession is when the GDP growth rate is negative for two or more quarters in a row. However, a recession could start before the end of quarterly GDP reports. Therefore, the National Economic Information Bureau measures the other four factors.
Machine translated
Recession is a period of economic activity decline, when the value of production of goods and services decreases for a prolonged period of time. It is usually a measurable decrease in GDP over two consecutive quarters. Crisis, on the other hand, is a general state of economic threat, which can result from various factors such as recession, inflation, deflation, etc.
Recession is a period of economic activity decline, when the value of production of goods and services decreases for a prolonged period of time. It is usually a measurable decrease in GDP over two consecutive quarters. Crisis, on the other hand, is a general state of economic threat, which can result from various factors such as recession, inflation, deflation, etc.
Machine translated