RECESSION

QUIZ REVIEW GAME:12 Right: 2 pieces of candy, get out of

class 2 minutes early !

11 Right: 2 pieces of candy !

8-10 Right: Piece of candy !

7 Right: Congrats! !

6 or Less Right: Study well for the quiz!

A significant decline in national output (GDP). RECESSION:

A recession generally lasts from 6 to 18 months, but can sometimes last longer.

recession grow

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RECESSION & UNEMPLOYMENT:

Recessions increase unemployment because in hard economic times when

production is slowing down, firms are less willing to hire workers.

GDP Unemployment

Results of Recession:

The relatively short-term movement of a economy in and out of recession. In other words, the fluctuations of

growth and recession we that experience over time.

BUSINESS CYCLE

AN UNPREDICTABLE CYCLEThe word “cycle” makes the

business cycle sound consistent, but it’s hard to

predict how long a “boom” or “bust” will last. In reality,

the fluctuations of the business cycle can be

unpredictable.

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DEPRESSION:An especially

lengthy decline in national

output (GDP). It is a more severe downturn of the economy than a

recession.

USA GDP by Year

The “great depression”

GDP rises gradually over time, but

the road can be bumpy!

DEPRESSION VS. RECESSION:There is an old joke among economists that states: A

recession is when your neighbor 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.”

“GREAT RECESSION” 2008The worst global recession since WWII. The years leading up to the crisis were characterized by a boom in economic

demand, but suddenly, many large and well established investment and commercial banks in the United States and Europe

suffered huge losses and bankruptcy. The global recession that followed resulted in a

sharp drop in international trade, rising unemployment, and falling commodity prices.

“GREAT RECESSION” 2008

World map showing real GDP growth rates for 2009 (Countries in brown were in recession.)

“Great Depression, USA” “Great Recession, USA”

Bank Failures: 50% of banks Bank Failures: 0.6% of banks

Unemployment Rate: 25% Unemployment Rate: 9%

Economic Decline (GDP): -26% Economic Decline (GDP): -3%

Inflation: -25% Inflation: +0.5%

SOME CAUSES OF RECESSIONS:High Interest Rates: High interest rates the

amount of money people and companies have

available to invest. (When you borrow money,

banks charge you interest payments so they can

make a profit).

SOME CAUSES OF RECESSIONS:High Inflation: Inflation refers to a general rise in the prices of goods and

services. As inflation increases, the percentage

of goods and services that can be purchased

with the same amount of money decreases.

SOME CAUSES OF RECESSIONS:Reduced Consumer Confidence: If

consumers believe the economy is bad, they are less likely to spend money.