A recession in the economy is a decline in industrial production and the threshold of an economic crisis. What is a recession

“What is an economic recession?” — this question may be of interest to every person interested in the situation in the country. Our article will tell you what a recession in the economy is, what this phenomenon brings to the life of the state and whether it is worth fearing.

What does the word "recession" mean? The meaning of the word from the point of view of economists and ordinary people

The economy of a country, just like that of an ordinary company, develops cyclically: there are periods of revival, growth, slowdown and recession. Economists use the term “recession” to describe a period when the rate of development of a country’s economy slows down.

A recession does not mean that key economic indicators have stopped growing - just that their growth rate has been declining for 2 quarters in a row. There is a decline in business activity, enterprises begin to produce fewer products, due to which their profits decrease. The population begins to experience slight difficulties with work, due to which demand decreases.

This phase of the business cycle usually occurs after an economic recovery. And quite often after it a crisis or depression begins. But competent measures by the state can prevent such consequences and normalize the economic situation in the country.

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What does stagnation mean?

Stagnation is a complete stop of the economy. Production and trade practically stop, unemployment becomes widespread, wages and the standard of living of the population fall.

The stagnation of production can last for a long time until the state takes action and begins to bring the country's economy out of this state. At a time when the country is experiencing stagnation, life becomes very difficult.

Recession in Russia - can it be avoided and is it necessary to do so?

It is impossible to avoid a period of economic downturn, and the emergence of a recession is quite natural. During this period, the effectiveness of the state and the functioning of the financial system is checked.

If the right measures are taken during a recession to overcome it, the decline in economic growth rates will be almost unnoticeable. But if the government uses ineffective measures, the consequences could be serious, even leading to an economic crisis.

Types of recession in the economy

Economists divide economic recession into 3 types.

1. An unplanned recession occurs due to unexpected changes. This could be the start of hostilities, a fall in world prices for gas and oil, and much more. As a result, a state budget deficit forms and the level of GDP begins to fall. According to economists, such a recession is dangerous for the country, since it is impossible to predict and it is difficult to select measures to overcome it.
2. A psychological or political recession occurs due to mistrust of consumers, businessmen and investors. Purchasing activity decreases, the volume of investments decreases, and securities prices fall. But this type of recession is easy to overcome - it is enough to regain the confidence of the country's population. This can be done by lowering interest rates or using various psychological methods.
3. A recession may also occur due to rising external debts. As a result, stock prices fall and there is an outflow of funds. Such a recession is also dangerous, as it can last for many years.

Signs of recession in the economy

You can determine that a recession has begun in a country based on a number of signs:

• the unemployment rate in the country began to increase slightly (gradually);
• there is a decline in production, but enterprises continue to operate and provide the population with the necessary products;
• stock market indices began to fall;
• inflation rates are increasing;
• there is an outflow of capital abroad.

But all of the above phenomena do not have critical indicators. For example, the inflation rate may increase by only 2-3%. When all of the above signs manifest themselves actively, they say that a depression has begun in the country.

What triggers a recession in the economy and what can this phenomenon bring to the country's economy?

A recession can start for many reasons. Economists name 4 main ones that most seriously affect the situation in the country and can lead to a recession.

1. Changing market conditions. WFP growth may slow due to military activities, falling oil prices and much more. For example, the main source of replenishment of the Russian budget is the sale of oil. If the price of a barrel falls, the budget deficit immediately begins to appear.
2. Decline in national production. The predominance of imported goods in the country leads to a decline in the activity of domestic enterprises. Consumers do not see the point in buying Russian goods if they can buy imported ones for the same price. As a result, production rates fall, leading to a recession.
3. Decrease in people's income. This leads to a drop in demand and has a detrimental effect on the economic situation.
4. Fall in investment. If the population with money stops trusting the state or finds more profitable and reliable ways to invest abroad, a recession may begin. To prevent this from happening, the state must constantly monitor the conditions provided and improve them - then investors will invest money only in the national economy.

It is almost impossible to predict an economic downturn. At the same time, this task is very important both for the government apparatus and for representatives of various sectors of society. The state can take measures that will reduce the scale of the recession, and at the same time its consequences for the country's economy. A long period of decline in the economy—usually two quarters—is called a recession. At this time, the main economic indicators in the country (or in the world) are falling.

Place of recession in the economic cycle

A recession is often called a decrease in the rate of production, its decline. This period is part of the entire economic cycle, and it immediately follows an economic boom. Sometimes a recession is preceded by a period of stagnation - a lack of GDP growth indicators. It is believed that this is the state in which most countries on the planet currently find themselves. Economic growth necessarily gives way to periods of recession.

A recession is... Definitions in economics

There are a lot of vague terms thrown around these days: gravediggers have become “funeral home experts,” custodians have become “caretakers,” and advertising agents are now called the big name “public relations professionals.” The same applies to the economic sphere. The initial stage of an economy in a recession was once called a “panic.” Society fell into these periods almost regularly. The long period after the “panic” was called “depression.”

The most famous such “depression,” of course, is the crisis of 1929, which, just like other critical periods, began with a “panic.” The economic recession at that time lasted until the outbreak of World War II. After the 1929 disaster occurred, leading economists and politicians around the world decided that this crisis should never happen again in human history. And in order to solve this problem as quickly as possible and with a minimum of hassle, they set a simple goal: to remove the word “depression” from the vocabulary of citizens. Since then, the United States has never had another economic "depression" - the crisis that broke out in 1937 was now called a "recession." However, the phrase “economy in recession” also seemed jarring to members of the American public. Other alternatives were also invented - “economic recession”, “slowdown”, “deviation”.

Today's ideas about cycles

Modern views on periodicity in economics originate from Karl Marx. It was he who noticed that periods of recovery alternate with recessions in the economy. Moreover, this periodicity began only after the industrial revolution. Previously, an economic crisis could erupt when a ruler or king declared war or decided to confiscate the property of his subjects. However, there have never been long periods of recession in the economy, which would alternate with periods of recovery, like a pendulum. Marx concluded that business cycles are an integral part of a capitalist market economy.

Recession in economic cycles

Natural money created in a free market is useful goods - mainly gold and silver. If money were limited to these items, then the economy as a whole would function in the same way as individual markets function: a smooth matching of supply and demand and, therefore, no cycles of booms and busts. However, the introduction of loans adds another element to this picture, which is destructive. Banks that expand credit thereby increase the supply of money in the form of notes and deposits (in theory, these are payable on demand, although in practice, of course, this is not the case). As long as the bank does not receive an influx of claims for reimbursement of loans on receipts, its accounts function as the equivalent of gold.

Recession mechanism

Banks are always willing to expand lending - after all, the more loans they issue, the higher their profits will be. When the amount of paper and bank money increases, the income of the population begins to increase, while the increase in the money supply also provokes an increase in prices. The result is inflation and an economic boom. However, this boom also contains the seeds of its end. As the money supply in the country increases, the population begins to buy more and more goods from abroad. Imports begin to exceed exports, and money seems to “flow” to foreign countries. Credit money will increasingly increase against the background of the depletion of the country's real gold reserves. Ultimately, banks begin to cut back on lending, and in order to stay afloat, they begin to buy back part of their liabilities. Such a retreat is often accompanied by an influx of requests for receipts from clients.

It is the compression of the banking system that radically changes the situation - inflation and boom are followed by recession in the economy. This is accompanied by the fact that banks are increasingly moderating their ardor, and enterprises are beginning to incur losses. The reduction in banking offers leads to prices in the country falling. Domestic goods are becoming an order of magnitude more attractive to buyers than foreign ones. Exports begin to exceed imports. More and more gold is gradually entering the country - a new economic cycle is emerging.

Causes

Having examined the periods in the economy, you can see that the reasons for the recession in the economy are not at all that any disruptions begin to occur in the free market. Quite the opposite: government intervention provokes such a cyclical pattern. When the government begins to influence the free market, banking inflation and expansion occurs, followed by a crisis.

Many students are interested in what a recession in the economy is in simple words. There is nothing complicated in this concept: it is simply a decline in production due to zero or negative GDP growth. Moreover, such a drop in GDP is directly related to the period of stagnation. For a downturn to be called a recession, it must last at least six months.

Types of Recessions

There are three types of recessions, depending on the reasons that cause them:

1. Recessions that are caused by unplanned interventions in market conditions. For example, it could be a war or rising oil prices. This is the most dangerous type of recession of all. It is almost impossible to predict; it has the most severe impact on the entire economy of the country.
2. Recessions that are caused by psychological or political reasons. For example, this includes factors such as a decrease in buyer (consumer) confidence, or an increase in uncertainty in the business environment. In fact, the amount of supply and demand fluctuates due to the influence of anthropogenic factors. This is a rather unpleasant type of recession in terms of consequences. However, it can be neutralized relatively easily. To do this, interest rates need to be lowered. The second option to overcome this is to create an artificial stir in society.
3. The next type of recession involves a fall in equilibrium in the economic system. Debts are growing very quickly amid falling market prices.
4. Also, an economic recession may occur due to a decrease in household income. Because of this, purchasing power is sharply reduced, and the economic situation in the country is worsening. A recession that occurs due to a decrease in consumer activity is not as bad as an economic recession that occurs due to lower oil prices or wars. Experts note that this type of economic downturn is much easier to combat.
5. Inevitably leads to economic depression and a decrease in production. For example, this factor could be traced during the 2008 crisis in Russia. Then industrial production in the country fell by more than 10%.
6. Due to the impact of these factors, the world essentially has fictitious capital. Further events are easy to predict - a crisis, or a very long phase of depression. This process is inevitable. However, exactly how a country deals with the crisis largely depends on economic policy. If the government sets the right course, the effects of an economic downturn can be significantly reduced.

Exit

An economic downturn is temporary and will end one way or another. However, as a rule, a recession is always quite long, because it is preceded by a number of different factors - economic and geopolitical. There is no way to avoid cyclicality in the economy. If the company manages to stay afloat by using radical measures, waiting for the beginning of the next period, then the process of overcoming the crisis will not present any difficulties.

Global economic recession

In 2008-2009, one of the largest economic crises of our time began. The recession has affected both developed and developing countries. Oil began to become cheaper, and the forecast for GDP growth in many countries has seriously worsened. The crisis, which began in 2008, according to some experts, was not overcome even by 2015. In its scale it was comparable to the Great Depression of the 30s.

By the second quarter of 2009, the recession in America and the Eurozone began to come to an end, but in 2011 the crisis flared up with renewed vigor. As a result, the position of the middle class throughout the world has seriously deteriorated, although at the same time its share of total world wealth has increased.

Crisis in Russia

The Russian economy could not avoid troubles. In 2008-2009, Russia was also hit by an economic crisis associated with falling oil prices. The main industry that brought profit to the country suffered. The current crisis, which has lasted throughout 2014-2015, also arose for these reasons. The current situation is also aggravated by the decline in production in the country, although insignificant. According to experts, in 2017 the recession in the Russian economy will decline. This will also have a significant impact on economic growth

Greetings, dear readers! I try to visit my grandmother at least once a month.

She still retains clarity of mind and an insatiable interest in events both local and global. Sometimes we can discuss various news with her for hours.

For example, last week we discussed with her the emerging negative trends in the country’s economic development. I want to raise this topic with you, friends. Now I’ll tell you about recessions in the economy - what they are and what consequences ordinary citizens can feel.

A recession is a negative trend in macroeconomics (the national economy), often preceding a crisis. This phenomenon is cyclical in nature and is inevitable for any economic system.

Recession (Latin recessus - retreat) is a concept in macroeconomics that denotes a drop in production rates over a long period (from six months or more).

Warning!

The process is characterized by zero or negative dynamics of GDP (gross domestic product). A recession entails a decrease in business activity and a slowdown in economic development. A reduction in GDP refers to a decrease in the production of goods and a decrease in consumption.

A recession inevitably follows a boom (production boom), which is explained by the cyclical nature of any economic system.

In general, the economic cycle consists of four phases - growth (rise), stagnation (stabilization, absence of any dynamics), recession (fall) and crisis (depression).

The duration of the economic cycle in the modern global world is 10–15 years, which can be tracked by the global financial crises – the 70s, 90s and the last global crisis of 2008–2009.

Causes

There are several main causes of recession, depending on the level of economic development.

For resource-based economies, the decline is driven by lower prices for oil, gas and other exported minerals. The price of raw materials falls, the budget receives less revenue, and a deficit appears that needs to be compensated somehow.

To compensate, tax rates are increased and spending on social needs (education, medicine, etc.) is reduced. Such actions further intensify the decline in production.

In developed (industrial and post-industrial) countries, recession manifests itself as a result of a change in the technological structure, for example, due to the emergence and development of information technology.

The technological structure is understood as the level of development of technology and technology, the main directions of development of scientific and technological progress.

Attention!

It is impossible to influence the indicated reasons for the occurrence of a recession; they arise due to the objective laws of economics, so a recession at the level of an individual national economy will happen sooner or later.

A recession in one country can lead to a recession in other economies, leading to a global crisis.

There are reasons that arise under the influence of market participants. The economic downturn may be caused by problems in the banking sector.

For example, commercial banks have issued too many loans that are not repaid. Then financial organizations are forced to raise rates and raise funds in the foreign and domestic markets.

In a situation when there are too many such banks, the number of loans issued falls, enterprises therefore cannot borrow money and, in the absence of funds, stabilize or curtail production.

Because of this, unemployment is growing, people and companies are not paying off loans, banks are tightening rules, and the situation is entering a vicious circle and getting worse.

Force majeure circumstances, for example, war or a sharp change in energy prices, can plunge the economy into a recession phase. A way out of stagnation is only possible with the participation of the state, which will “pour” money into the economy, supporting various industries and stabilizing the exchange rate of the national currency.

Consequences

The main consequences of a recession in the economy include the following:

• drop in production volumes;
• collapse of financial markets;
• reduction in the volume of loans issued;
• increase in interest rates on loans;
• rising unemployment;
• decline in real incomes of the population;
• decline in GDP rates.

The most powerful and critical consequence of a recession is the economic crisis. Due to the decline in production, the need for jobs and the number of workers decreases. This entails a wave of layoffs and rising unemployment. People begin to consume less, which leads to a decrease in demand for products and an increasing decline in production.

The debt of citizens and organizations to banks is increasing, which, in turn, are tightening the procedure for issuing loans.

Advice!

The volume of lending to individuals and legal entities is decreasing, the volume of investment in industry and science is decreasing, and scientific and technological development is slowing down. The decline in production is followed by a collapse of the securities market - shares of large industrial enterprises sharply lose value.

These events are followed by depreciation of money - inflation, further rise in prices and a decrease in real incomes of the population. Which ultimately leads to dissatisfaction and a decrease in quality of life.

The state is trying to find funds and is increasing its external debt. In the absence of sufficient finance, you have to refinance current loans and take out new ones.

All of these consequences are reflected in one indicator - a decrease in GDP (gross domestic product), which directly depends on the volume of production within the country.

source: http://delatdelo.com/spravochnik/terminy/chto-takoe-recessiya-v-ekonomike.html

An economic crisis never happens unexpectedly. It is anticipated by a recession. Any economic system, even a progressive one, sooner or later enters a recession stage. A recession is undesirable, but inevitable.

A recession is a long-term, initially not very pronounced decline in production and business activity, which worsens over time and turns into a crisis.

The recession period is characterized by such phenomena as:

• negative GDP dynamics (both the quantity of products produced and the demand for them decrease);
• low business activity;
• lack of progress in the economy.

A recession is the stage following the stage of rapid economic development. Since all economic systems are cyclical, recession can be considered a natural process.

Warning!

It is known that there are four phases in every economic cycle. Rise and prosperity are inevitably followed by stagnation - a stage of stabilization and stagnation. Stagnation is replaced by recession. The “life cycle” of the system ends with an economic crisis.

It is futile to try to predict when a recession will begin. However, the government can prepare the country for it, take a kind of “depreciation” measures that will partially neutralize the negative phenomena accompanying the recession. A crisis will come only if the state's economic policy turns out to be ineffective.

Causes

An economic downturn does not happen suddenly. It is the result of many events and processes.

The cause of a recession can be global and unexpected changes in the market, which, in turn, are provoked by political changes. Roughly speaking, armed conflicts or jumps in gas/oil prices on the world market may be to blame for a slowdown in production and a decrease in demand for any product.

Unfortunately, the Russian economy is clearly dependent on the cost of oil. As soon as the market price of oil decreases, the budget begins to experience underfunding, which ultimately affects the volume of gross domestic product.

Experts believe that a recession that develops according to this scenario poses the greatest danger to the state, since it cannot be predicted and neutralized in time.

The second possible cause of recession is a total decrease in production volumes. A serious decline in production was recorded in 2008. It amounted to more than 10%.

The lack of “extra” money among citizens and a decrease in their purchasing power also lead to a recession. True, it is believed that a recession caused by these reasons is completely surmountable and does not have such dire consequences as a recession provoked by wars or market turmoil.

Attention!

Another factor causing a recession is capital outflow and lack of investment. Replenishment of the state's fixed capital occurs at the expense of private enterprises.

If the government is interested in these injections, it must provide business with conditions under which it can develop normally within the framework of the national economic system.

Consequences of recession in the economy

Now let's list the consequences of the recession:

1. financial markets collapse;
2. production rates are slowing down;
3. banks limit the issuance of loans;
4. interest rates on loans are rising;
5. the number of unemployed is also growing;
6. household incomes are declining;
7. GDP volume decreases.

All these phenomena together lead to an economic crisis.

The result of the decline in production is a decrease in the need for labor. Industrialists fire people, and they can no longer find a new job. A decrease in income leads to a reduction in needs. As a result, the demand for goods that can be dispensed with decreases. Production does not experience any incentives for development.

Individuals and legal entities become debtors of banks. Circumstances force banks to limit the issuance of loans. Investment in research projects and industrial enterprises is reduced, and the country begins to lag behind in terms of science and technology. Stagnation in the production sector affects the value of shares issued by industrial enterprises. They lose value.

The next stage of the crisis is characterized by rising inflation and the beginning of the devaluation of the national currency. Prices continue to rise and incomes continue to fall. The standard of living of the population is also falling, which leads to mass discontent.

The government is turning to more prosperous countries for financial assistance. The state's external debts are growing. To pay off one loan, you have to take out several others.

All these negative phenomena directly affect the volume of GDP. Its decline indicates a deterioration in the economic situation in the country.

It is noteworthy that there is no consensus among economists about the nature of the recession. Some believe that this phenomenon in itself is not critical, while others believe that recession, collapse and depression are synonymous.

source: http://www.temabiz.com/terminy/chto-takoe-recessija.html

Economic recession

What is an economic recession or just a recession? A recession (from the Latin Recessus - retreat) is a decline in production, which is characterized by zero or negative growth of the main macroeconomic indicator - gross domestic product (GDP), lasting for six months or a longer period of time.

Advice!

A recession is one of the phases of the economic cycle that always follows a period of economic expansion, accompanied by the achievement of a peak point in business activity, and precedes the phase of economic crisis and depression.

It is in this state, in a state of recession, that the economies of the vast majority of countries in the world find themselves in at present. Thus, economic growth is necessarily replaced by economic recession.

Depending on the factors that serve as the beginning of the recession phase in the economy, three types of recession are distinguished. In the first case, an economic recession occurs under the influence of unplanned and very profound changes in market conditions.

Among the phenomena that entail such consequences and actually a recession include wars or a sharp change in world prices for natural resources, or more precisely, for oil. An economic recession caused by such phenomena is especially dangerous. Such a recession cannot be predicted or foreseen, so they have a very painful impact on the country’s economy.

The prerequisites for the second type of recession are more likely to be political or even psychological in nature. These include declining levels of consumer confidence or growing uncertainty among entrepreneurs or investors.

Such a recession is less harmful for the country’s economy, and the current situation can be quite easily corrected by lowering interest rates or artificially creating some excitement in the economy.

The third type of recession occurs when the economy loses its equilibrium and is characterized by rapidly rising debts and falling prices in the capital and stock markets.

The prerequisites for the recent global economic downturn and, accordingly, recession were an unprecedented increase in commodity prices caused by active consumption, an unreasonably large number of mortgage loans issued to borrowers with a high degree of risk, as well as the rapid development of the activities of speculators who created a whole world of fictitious capital.

Warning!

An economic recession inevitably leads to a crisis, and in the worst case, to a prolonged depression.

It is impossible to avoid this process, however, the state, which plays an important role in the process of economic recovery, can significantly shorten the duration of the recession and reduce the scale of the consequences of the economic downturn in a particular country and the world as a whole.

What is a recession in the economy

A recession is a depressed state of the economy, a phase of decline and inhibition of all constructive activity. A characteristic feature of a recession is an increase in the unemployment rate, the gross national product (GNP) tends to zero as production declines.

What does the word "recession" mean? Translated from English, recession means “fall, decline.” The word comes from the Latin recessus, which means retreat. Speaking in terms of economic cycles, an economic recession is a moment of decline after a boom, followed by a bottom phase, followed by a rise, after which a peak or boom occurs again.

A variant of a deep recession is called a depression. However, these days the term is completely unpopular. More often they talk about a recession. The most famous great recession or Great Depression occurred in the United States in 1929.

Since then, as economist M. Rothbard notes, the US government was so afraid of something like this happening again that it literally banned the term “depression” and introduced the more common “recession.” But over time, recessions began to occur more and more, so instead of them, the concepts of recession, deviation, and slowdown in production were introduced.

In the global economy, not a single downturn goes unnoticed by other market players. Since in macroeconomics all countries are ultimately “tied together” by a single market for sales and consumption. The largest global recession in recent memory occurred in 2008–2010.

Starting with the collapse of the real estate market in the United States, the economy of the largest power on the continent of North America pulled the whole world with it. This decline led to a reallocation of resources in markets. People in all countries lost money, the savings of many sank into oblivion.

Causes

By definition, the economy develops in cycles. The cycle of contraction (recession, recession) is followed by a cycle of expansion (rise). Due to its cyclical nature, it cannot be said that a recession is an unpredictable or unusual phenomenon. On the contrary, almost any recession can be predicted.

Attention!

In modern economic theory, there are four types of economic cycles of different stage durations (rise, peak, recession, depression) - from 2-3 to 50-60 years. In general, it cannot be said that cycles are so clearly measured; in life, one stage can last longer or shorter, depending on current world events.

The more-mentioned cyclicality can be traced in the model of the 19th century French physician and economist C. Juglar. The duration of each phase, including the recession phase, is from 6 to 12 years.

A typical recession is a decline in business activity for three months or more. Since a recession follows an economic peak, the reasons can be considered the emergence of new technologies, increased harvests, and changes in prices for raw materials. A recession can also be triggered by force majeure in the form of a war, natural disaster or revolution.

The recession is growing like an avalanche: anticipating a possible recession, consumers begin to buy more or, conversely, save, firms begin to produce more or reduce production rates, in a word, massive fluctuations in business activity occur.

The market is trying to find a new equilibrium point, as a result this leads to a decline in production and a decrease in investment activity.

Types

There are three types of recession depending on the causes.

1. Political recession. It is based on psychological reasons. As a rule, it is associated with an increase in investor uncertainty and entrepreneurial doubts. Consumer confidence is declining.
2. Debt recession. Associated with an increase in the country's external debt. Characterized by falling stock prices and outflow of funds. May last for many years.
3. Force majeure recession. Occurs due to powerful factors such as war or a sharp decline in oil prices.

Each type of recession is surmountable and will pass in any case, the question is how long this economic phase will last.

The first type is easily eliminated by increasing citizen confidence, for example, by lowering interest rates. The second type may take years to emerge and move from the depression phase to growth. It is associated with the restructuring of the economy of a country or an entire region and finding a new equilibrium point.

The third type of recession, on the one hand, is the most unpleasant due to the suddenness of its occurrence, on the other hand, measures must be selected depending on the factors that provoked the economic recession.

Signs

How to understand that an economic recession has already begun? A number of characteristics that indicate the beginning of a recession followed by stagnation:

• increasing the level of inflation in the country;
• rising unemployment;
• fall of stock indices;
• reduction in production rates;
• outflow of capital abroad.

According to another classic definition, the signs of a recession are:

1. the fact that the phase follows the boom;
2. decrease in business activity;
3. decline in production.

The above economic indicators are clear to specialists, but how can ordinary citizens see the impending recession?

Due to the fact that prices for well-known goods have crept up, purchasing power, i.e. how many goods can be bought for the same money as before has fallen. Inflation has increased (you can learn about this from the news), unemployment is growing.

Advice!

The recession period can last from three to ten years. Its duration can be roughly judged by the boom cycle before it. The end of a recession means the economy has reached bottom, i.e. as deep as possible in the minus relative to typical economic indicators.

The end of a recession, although it leads to a lower point - a trough or depression - means the beginning of economic growth afterwards. The economy will be rebuilt and a new wave of prosperity and prosperity will begin.

Consequences

From the point of view of economic theory, a recession in itself is not harmful or malicious. There is no need to be afraid that it will happen. It is precisely the opposite expectation that growth will continue continuously that is erroneous and leads to the collapse of hopes.

Growth gives way to boom, but they cannot last forever, some economic instruments become imperfect, new technologies and production appear. And this is good.

A recession is, in some way, a “cleansing” of the economic body of a country or a number of states. It helps the economy rejuvenate and enter a new stage of development.

For ordinary citizens, the consequences of a recession are:

• job losses;
• decrease in purchasing power;
• depreciation of money;
• reduction in the variety of goods due to a decline in production.

In short, it's time to tighten our belts. However, if you look at this period as a time of getting rid of unnecessary things and adjusting to a more suitable wave of economic growth - undergo additional training in order to then find a new, higher-paying job, expand career opportunities, review and reduce family expenses, start buying only what you need. What is really needed is that, having emerged from depression, you will not be in the position of a victim beaten by economic squabbles, but will begin to reap the fruits of the success laid down during the recession.

source: http://business-poisk.com/recessiya-v-ekonomike.html

What is a recession: definition, signs and characteristics, types of recession, causes and consequences

Recession (from the Latin recessus - retreat) is a phase of the economic cycle, characterized by a moderate, non-critical decline in production in the country; recession is also called a slowdown in the rate of GDP growth or its decline, accompanied by an increase in unemployment, a decrease in bank lending and a decrease in the volume of investment in fixed capital. A recession, as a rule, is a precursor to a crisis in the economy.

Why does a recession occur?

The causes of a recession may be:

1. natural development of the economy, when after strong growth, having exhausted the possibilities for upward movement, the economy needs a break;
2. wars and civil strife;
3. sharp changes in prices for raw materials, in particular oil;
4. undermining customer confidence;
5. uncertainty among entrepreneurs and investors;
6. growth of internal and external debts (possible consequence - default);
7. fall in stock and capital prices.

What are they?

Depending on the reasons, there are three types of recession:

Unplanned recession. This type of recession occurs as a result of some unexpected events: wars, a sharp drop in world prices for oil, gas and other minerals. As a result, there is a deficit of financial budget funds and a decrease in the level of GDP.

Recession at the political or psychological level. This type of recession arises as a result of increased distrust among the consumer population, entrepreneurs and capital holders. It is a consequence of a decrease in purchasing activity, a decrease in investment and a decrease in the value of securities.

Recession as a consequence of the country's external debts. As a result of such debt, there is a decline in prices and an outflow of funds from the country. This type of recession is considered the most dangerous and can last for many years.

What is it characterized by?

Characteristic signs of a recession are:

• Gradual, without sudden jumps, increase in the unemployment rate.
• Industrial production volumes are falling, but enterprises operate producing products in smaller volumes.
• Fall in stock indices.
• Growth of inflation indicators.
• Increased capital outflow abroad.

In a modern economy, a recession is characterized by a non-critical drop in key indicators over two quarters.

When are you attacking?

The economic cycle consists of four phases:

1. growth (rise),
2. stagnation (stabilization, absence of any dynamics),
3. recession (fall)
4. crisis (depression)

The duration of the economic cycle in current realities is 10–15 years.

What are the consequences of a recession?

The main characteristic consequences of a recession are:

• Fall in production volumes in the state.
• Collapse of financial markets.
• Reducing the number and size of loans issued by banks.
• Rising interest rates on loans.
• Rising unemployment rate.
• Reduction in citizens' incomes.
• Rising inflation.
• Systemic price increases.
• Increase in public debt.
• Fall in GDP.

source: https://fortrader.org/birzhevoj-slovar/ekonomicheskie-ponyatiya/recessiya.html

Recession, what is it in simple words - causes and significance in economics

The question of what a recession is in a state’s economy may worry the majority of its residents who are interested in the situation. Understanding this economic process will allow you to understand what impact it has on the economy and life of the state and whether it is worth fearing.

Concept

There are many definitions of this economic term, so it is worth familiarizing yourself with the most significant ones. A recession is one of the phases of the economic cycle, which is a precursor to a financial crisis.

Attention!

Recession is a term related to the macroeconomics of a state; it denotes a decline or noticeable reduction in production rates immediately following a so-called boom, characterized by a gross domestic product indicator equal to zero or even having a negative value for 6 or more months.

Recession is a moderate, non-critical decrease in production indicators, entrepreneurial activity and economic development rates, usually associated with a decrease in GDP.
Recession is a slowdown or decline in the growth rate of gross domestic product.

A recession is one of the phases of the economic development cycle, which follows the economic recovery, accompanied by the achievement of the maximum indicator of economic activity. This phase is a precursor to depression or crisis.

Recession is a state of the economy when GDP has been declining for 2 or more quarters, that is, factories begin to reduce output, stores sell less, and, accordingly, buyers buy less.

Advice!

A recession is a serious reduction in business activity in a country, which is accompanied by a large number of negative consequences (unemployment, decline in stock exchanges, reduction in investment, etc.).

A recession is certainly accompanied by three main signs:

1. The phase of economic life immediately following an expansion or boom;
2. Accompanied by a reduction in economic activity;
3. Leads to a reduction in production.

Many definitions mention that a recession is a phase of the economic development cycle, and the cycle itself consists of 4 main phases:

• Climb.
• Stagnation.
• Recession.
• Economic depression.

The duration of all phases of the economic cycle, as practice shows, is about 10–15 years.

The recession does not mean at all that important indicators have stopped growing. This phase may indicate that the growth rate of key indicators simply decreased over the course of six months. Usually a recession is a precursor to a crisis, but if all the necessary measures are taken in time, then such consequences can be avoided and the situation can be returned to normal.

Reasons for the attack

This phase of the economy can occur as a result of a whole list of various factors, starting from the cost of petroleum products and ending with the number of unemployed in the country. The main reasons for its occurrence are considered:

The emergence of conditions favorable to the development of a recession due to unplanned internal economic changes. Thus, this state of the economy may be caused not by economic events in the country, but by political ones, or by changes in prices at the world level for natural resources, and, in particular, oil.

The Russian economic region is dependent on the price of this mineral, and in the event of a serious drop in its value, the country's budget will lose a significant amount, which, in general calculations, leads to a drop in GDP.

Economists argue that this type of recession is the most dangerous due to the impossibility of predicting it in order to take measures in advance to support the economy.

A drop in the pace of industrial production processes, which inevitably entails a recession.
The transition of the economy to the recession phase can be provoked by a decrease in the income of the population, which leads to a decrease in the ability to buy and worsens the economic situation of the country.

Warning!

This type of recession is not the worst, and economists argue that it can be dealt with easily and quickly, preventing a crisis.

A recession may be a consequence of capital flight abroad or a reduction in foreign investment and government capital. As a rule, most of the investments are attracted by private entrepreneurs. And in order to avoid such a recession, the government should create conditions so that entrepreneurs seek to invest their funds in the national economy.

Kinds

Economists distinguish three main types of recessions, depending on the reasons for their occurrence:

Unplanned recession resulting from unexpected changes. Such events could be: the onset of war, a sharp decline in the world price of oil, gas and other minerals. The consequence of such events is a deficit of financial budget funds and a decrease in the level of GDP.

It is this type of recession that is most dangerous due to the fact that it is simply impossible to foresee, and it is even more difficult to determine an effective exit method.

Recession at the political or psychological level, resulting from increased mistrust of the consumer population, entrepreneurs and capital holders. It is a consequence of a decrease in purchasing activity, a decrease in investment and a decrease in the value of securities.

This type of economic recession can be overcome simply by regaining the trust of buyers, which is done by reducing prices, interest rates and by putting various psychological techniques into practice.

Recession as a consequence of the country's external debts. As a result of such debt, there is a decline in prices and an outflow of funds from the country. This type of recession is considered the most dangerous and can last for many years.

In addition to this causal classification, there is a division of recessions into types depending on the shape of the graph reflecting changes in GDP indicators:

1. V recession. Characterized by a fairly powerful and high-speed decline in GDP, which in such conditions does not reach depression. The fall in such circumstances is pronounced, unique and subsequently leads to a return of GDP to its previous level.
2. U recession. GDP in such a situation has a fairly long-term and stable position at a low level without serious movements along the schedule either up or down, with a rapid recovery in the future.
3. W recession. As a result of this phase of the economy, there is a fairly short-term jump in the growth and development of GDP to a high level in the middle of the recession phase. The graph of such a recession resembles several type V recessions in a row.
4. L recession. In such a situation, there is a fairly rapid decline in GDP, which is followed by a long and fairly smooth recovery.

Characteristics of an economy in recession

It is possible to identify that a stage of the economic process such as a recession has already begun in a country by the presence of a list of its obvious factors:

• The unemployment rate is gradually increasing without sudden jumps.
• There is a clearly noticeable decline in production, but production does not stop, but functions, providing citizens with the necessary products, but in smaller volumes.
• Stock indices began to fall.
• Inflation indicators are increasing.
• There is a significant transfer of funds abroad.

At the stage of economic recession, not all its signs become critical. So, for example, a recession is indicated by an increase in inflation of only 2–3%, at a time when all other recession indicators are active, which is evidence of the onset of an economic depression.

What does it lead to?

The main and most obvious consequences of this period of economic decline include:

1. Reduction in production volumes of the country's enterprises.
2. A complete financial collapse of the markets.
3. Reducing the number and size of loans provided by banks.
4. Increase in lending interest rates.
5. Soaring unemployment rate.
6. Decrease in income of the population.
7. Inflation rate increases.
8. Constant price increases.
9. Increasing the country's debt.
10. Fall in GDP indicators.

The most serious, dangerous and powerful consequence of a recession is the economic crisis. The decline in production volumes leads to a decrease in the number of jobs and massive layoffs. People lose their jobs, begin to save, cutting their expenses, which results in a reduction in demand, which leads to an even greater decrease in production volumes.

Attention!

The debt of residents and enterprises to banks also begins to increase, which react by tightening the conditions for issuing loans. Lending volumes are sharply reduced, and this leads to a reduction in investment in science and industry.

A reduction in production volumes leads to a collapse of markets and a decrease in the value of securities, especially shares of large industrial companies.

Such changes are followed by a depreciation of the country's monetary units, leading to an increase in prices, a reduction in income levels, an increase in citizen dissatisfaction and a reduction in the quality of life for the population.

The government, trying to correct the situation, begins to borrow more from its neighbors and all this leads to a reduction in the same GDP, which is a sign of the onset of a recession that can develop into depression and crisis.

The difference between recession and stagnation

The period of decline or increase is the main difference between recession and stagnation.

The stagnation phase is characterized by:

• Complete economic stagnation lasting for a long time.
• Increase in the number of unemployed.
• A serious decline in the quality of life of citizens.
• Low or almost zero GDP.

If economic stagnation is characterized by high inflation, then it is called stagflation.

A recession is not characterized by a rapid decline, but not by stagnation. And this clearly indicates that recession and financial stagnation are distinguished by periods of decline in GDP and its consequences for the situation in the country.

To understand whether a decline during a recession or stagnation during stagnation is worse, it is necessary to consider each specific case separately.

A recession does not mean that the country is facing depression and people should prepare for difficult times. With a competent economic approach to government management, all the consequences of a recession can be prevented, bypassing the phase of economic depression.

But, of course, this is not always possible, so before drawing conclusions about the economic situation in the country, you should consider all economic indicators and the reasons for the onset of a recession.

Today we will look at another economic term and talk about what it is economic recession. After reading this article, you will learn what the concept of “recession” means, what criteria can be used to determine it, what are the main causes and consequences of a recession. I think this will be interesting and useful for everyone to know. So, recession – what is it in simple words.

Economic recession: what is it?

Economic development always occurs in cycles; there is a concept - a repeating period of economic development of a country, consisting of four phases: rise, peak, decline and bottom. So, a recession in simple words is just another, alternative name for the phase of economic decline.

An economic recession is a time period during which there is a decline in the rate of economic development of a state.

However, to be more precise, the macroeconomic term “recession” means a systematic and insignificant slowdown in the rate of economic development. That is, when a country’s economy is falling at a rapid pace, it is simply called a “fall”, “recession,” and when a slow, sluggish process occurs, the term “recession” is more often used.

The term “recession” comes from the Latin recessus, which means “retreat.”

A period of economic recession is usually a long process. It lasts at least six months to a year, but more often – several years.

Due to the cyclical nature of economic processes, recessions in the economy are inevitable: they are inherent even in the most highly developed countries; it is virtually impossible to avoid a recession.

It is also interesting that the economies of large states are closely interconnected, therefore periods of recessions in different countries often begin one after another, collectively forming a global global wave of recessions - we have already observed and are observing this more than once.

What characterizes a period of economic recession?

How do you determine when an economy is in recession, which indicates that it has begun? Let's look at the main characteristic signs of a recession.

1. Fall in GDP. Or a systematic slowdown in GDP growth rates. This is the most important indicator of a recession.
2. Decrease in production and consumption volumes. During a recession in the state’s economy, not only production decreases, but also consumption of goods and services decreases, the so-called. business activity.
3. Rising unemployment. During a protracted recession, due to a reduction in production volumes, job losses begin and unemployment rises.
4. Fall in real incomes of the population. Naturally, the level of real wages is falling, and the purchasing power of the population is declining.
5. Rising inflation. This is not obligatory, but also a common sign of recession in developing countries (in developed countries, on the contrary, deflation may even be observed).

All these and other negative signs taken together indicate that a period of recession has begun in the economy.

Causes of recession.

Let's look at the main reasons for the recession: why does it happen, what causes it? I’ll say right away that these reasons may be different, depending on the degree of development of the state’s economy and its type.

1. The emergence and development of new technologies. Oddly enough, this factor can cause a recession in economically developed countries. Thanks to the emergence of new technologies, many old ones become irrelevant, the demand for outdated goods and services drops significantly, and accordingly, their production does too. Until new goods and services are fully introduced into the market to replace old ones, the recession continues.
2. Falling prices for raw materials. And this reason, on the contrary, causes a recession in countries with a commodity economy (such as Russia). The budget receives less revenue, which needs to be compensated for somehow: taxes and fees are rising, social spending is being cut, etc. All this slows down business development and reduces consumption. A recession is occurring.
3. Crisis in the banking sector. Often one of the reasons for a recession in the economy is the so-called. overlending of the market. Banks give out too many loans, and at some point, borrowers become unable to repay them. As a result, small banks go bankrupt, large banks raise loan rates, tighten requirements for borrowers - all this slows down the development of production, trade, and consumption, causing a recession.
4. Force majeure circumstances. For example, wars, revolutions, mass protests, strikes, a sharp change in the economic or political course in the country, etc. All this also inevitably entails a recession in the economy.

Consequences of the recession.

Now let's look at what a recession leads to, what are its main consequences for the state's economy.

1. Fall in production volumes. During a recession, production always decreases.
2. Fall in trade and consumption volumes. Accordingly, trade and consumption volumes decline following production.
3. Declining purchasing power of the population. People's ability to purchase goods and services is also declining.
4. Rising unemployment. Due to the decline in business activity, the unemployment rate is rising.
5. Decrease in lending volumes, increase in loan rates. Banks are increasing the volume of problem loans, they are reducing the pace of lending and raising rates.
6. Increase in deposit rates. At the same time, financial resources are becoming more expensive, and banks are attracting deposits at higher interest rates. However, the volume of deposits does not grow, but rather decreases, because Most people's savings and temporarily free money decrease.
7. Fall in the stock market. During a recession, the value of company shares falls, because... investments in them become more risky.
8. Reduced investment. Many domestic and foreign investors are withdrawing their capital due to increased risks and decreased returns.
9. Devaluation of the national currency. The recession is also reflected in the foreign exchange market: the national currency begins to devalue, because trust and interest in it is declining (typical for developing countries).
10. Rising inflation. At the same time, the cost of goods and services is rising: enterprises, in order to survive with falling volumes, are forced to increase them (also typical for developing countries).

All this together leads to the main consequence of a recession – a drop in GDP. But an even more important point is that a recession is always followed by a phase in which everything is even worse, in simple terms. True, a recession is always protracted, and the bottom is often a short turning point, after which economic growth begins. Therefore, what is worse is a moot point.

Now you have an idea of ​​what a recession is in the economy, what are its signs, causes and consequences.

Be financially literate to make it easier to navigate the financial and economic processes happening around you and draw the right conclusions. See you again at !

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All economies experience recessions sooner or later. This is one of the stages of economic cycles. Whether we like it or not, there will still be crises more than once. In this article we will talk in detail about this concept, name its main features and tell you why this phenomenon occurs.

1. What is a recession in simple words

Recession(from the Latin "recessu" - retreat) - this is a decline in the rate of production in the country

Simply put: this is a decline in the economy, or more precisely, GDP. This is a harbinger of a crisis, but it is not yet one. Timely measures taken allow everything to return to normal.

It's no secret that the economic cycle consists of the following phases, which follow each other

1. Economic growth
2. Stagnation (lack of growth)
3. Recession (the beginning of a decline in production rates)
4. Crisis (capital outflow, depreciation of the national ruble exchange rate, increase in unemployment)

As you can see, already at the second stage of stagnation one can sound the alarm that a transition to the next stage of economic decline is possible. If nothing is done, the growing panic will cause a crisis, the consequences of which will be much worse.

2. Signs of the beginning of a recession

Here are the signs that herald the onset of a recession in the economy.

1. Rising unemployment
2. Decrease in production volume
3. Securities start to fall
4. Rising prices for goods (inflation)
5. Credit rating drop
6. Decrease in lending
7. Reduction of wages earned
8. Decrease in GDP

3. Causes of recession

We figured out what a recession is and what its first signs are. Let's now look at the reasons for its appearance:

1. Changes in raw material prices. Moreover, for different countries, an increase and decrease in cost may be opposite factors. For example, those countries that purchase raw materials will suffer greatly if prices rise, and exporting countries will, on the contrary, break new profitability records.
2. Reduced income.
3. Capital outflow from the country
4. Sanctions of other countries
5. Global crises
6. Previous overgrowth
7. Wars
8. Deterioration of the economic climate in the country
9. The country's growing debt
10. High refinancing rate of the Central Bank

4. Consequences of the recession

A recession causes many problems in all areas of life. Let's look at the most common

• Lack of construction of new infrastructure facilities
• Freezing benefits and some social programs
• Salary reduction
• Job loss
• Decline in GDP
• Depreciation of the national currency
• Declining property values ​​and the stock market
• Increase in price of goods

Be that as it may, without recession there will be no growth. The economy is always structured in such a way that everything goes in cycles (waves). First growth, then decline, then new even more powerful growth. It takes decades to create such situations, so for the average person everything goes almost unnoticed.

Watch also the video “what is a recession”:

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