Understanding Economic Cycles: Recession, Depression, and Recovery
The Economic Cycle and its Phases
Economic cycles refer to the fluctuations in the economy that happen over time. These cycles have several phases, including expansion, peak, recession, trough, recovery, and peak again. Each phase comes with its own set of characteristics that impact economic activity. In this article, we will focus on three key phases: recession, depression, and recovery.
What is the name of the period when an economy begins to shrink?
Answer:
Recession
Explanation: A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. Or in simpler terms, a recession is the point at which an economy's trade and business are significantly stalled or come to a halt in its entirety.
What is the difference between recession and depression in economic terms? The main difference between recession and depression lies in their severity and duration. A recession is considered a mild contraction in the economy, usually lasting for a few months to a couple of years. On the other hand, a depression is a prolonged and severe downturn that lasts for several years, with significant declines in economic activity, employment, and GDP. While recessions are a normal part of the economic cycle, depressions are rare and have more severe consequences for individuals and businesses.