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!

 RECESSION:
A significant decline in national output (GDP).
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A recession generally lasts from 6 to 18

months, but can sometimes last longer.
RECESSION & UNEMPLOYMENT:
Results of Recession:

GDP Unemployment

Recessions increase unemployment

because in hard economic times when
production is slowing down, firms are less
willing to hire workers.
 BUSINESS CYCLE
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.
AN UNPREDICTABLE CYCLE
? The 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.
 DEPRESSION:
USA GDP by Year
An especially
lengthy decline
in national
output (GDP). It
is a more severe
downturn of the
economy than a The
recession. “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” 2008
The 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.