Tuesday, August 30, 2011

What does Recession really mean?

With the recent financial crisis wrecking havoc in many nations around the globe, more and more people worldwide are getting interested to know the meaning of recession for different reasons. Looking for the meaning of this word is now a lot easier using online vocabularies.

However, a lot people prefer to look for the meaning of recession using the more popular Wikipedia than any other sources. It is actually pretty easy to look for the meaning of the word using Wikipedia. You merely have to direct your browser to the official website and key-in the word recession into its search engine. You will be amaze to find out the comprehensive meaning of the word.

In Wikipedia, this word simply means a great financial turmoil wrecking havoc to any nation in particular or generation in general. The word recession when used as a terminology in economics means a business cycle reduction. It is a common slowdown in the financial activities for over a reasonable amount of time (for instance, greater than 2 successive quarters). Almost all the industries fall during recession, and the bankruptcy and the job loss rate will start to increase.

A Production is usually calculated using the Gross Domestic Product, the asset spent, the employment, the capacity consumptions, the household revenues, inflation, and the business gains. All of these will get affected during recession period and they tend to fall during this period.

Few refer recession to a situation where the financial system declines, i.e. a prevalent decline in the GDP or (Gross Domestic Product), employment, and trade that would last for more than 6 months. For few, it is simply a momentary downfall or depression in the prosperity or economical stability.

  • "Official Rule of Thumb"  2 or more quarters of  negative Real GDP growth

  •  Most Economies are usually not in recession
    • U.S. average postwar expansion: 50 months
    • U.S. average postwar recession: 11 months
    • The 1990s experienced the longest expansion since 1850 (the second longest was 106 months ; 1961-1969)
  • Great Moderation:
  • after the mid-’80s, expansions have become more stable and recessions less frequent and less severe
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