A recession is defined as a period of time when the economy contracts (negative economic growth) for 2 consecutive quarters. A recession is characterised by
- Lower Output
- Lower investment
- Higher Unemployment
- Increased government borrowing
- Lower Inflation
Graph of Recession
An official recession requires negative economic growth.:
- However economists often state the economy is in a recession when growth is very slow. For example if growth was 0.1% this is much lower than potential growth (2.5% in the UK) therefore an output gap would occur and higher unemployment may well result.
- This is sometimes known as a growth recession.
- The Great Depression of the 1930s was the longest lasting recession in the UK there was negative economic growth for many years and unemployment averaged over 20% of the workforce. In some areas unemployment was over 75%
- The UK has experienced recession in 1980-82 and 1991-92