Economic Recessions

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

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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

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