Monday, January 21

What is a recession? Recession Defined

Recession: That scary term that is being thrown at us as if some big, hairy, blood-thirsty monster is hovering over the country waiting to pounce on everyone it sees has a bank account balance of less than $5 Million dollars. The news broadcasts and websites spout out this word like it was as obvious and  2 + 2, but to me it seems to general and undefined. So, I took a look and found several reputable financial firm's definitions that somewhat help educate us about this lingering phenomena.
Edward Jones
A mild decline in stock prices, business activity and employment for two consecutive quarters (six months)

TD Waterhouse
technically defined as at least two consecutive quarters when the economy shrinks or fails to grow.

When demand in the economy decreases, prices of goods and services also decrease, resulting in a slowdown of the economy. When this slowdown becomes a long-term decline, this is known as a depression.

Morgan Stanley
Broadly defined, a recession is a downturn in a nation's economic activity. If national productivity, or gross domestic product (GDP), declines for at least two consecutive quarters, it is usually considered a recession. The consequences typically include increased unemployment, decreased consumer and business spending, and declining stock prices.

In macroeconomics, a recession is a decline in any country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. However, in the United States the official designation of recessions is done by the business-cycle dating committee of the National Bureau of Economic Research (Feldstein, 2007). That Bureau defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. A devastating breakdown of an economy (essentially, a severe depression, or a hyperinflation, depending on the circumstances) is called economic collapse. Newspaper columnist Sidney J. Harris distinguished terms this way: "a recession is when you lose your job; a depression is when I lose mine."

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