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“Today Shapes Tomorrow

 Published Every Monday    Volume  48      Special Edition                    December 2, 2007
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What is a recession?.

The economy is considered in recession when the GDP falls for the two consecutive quarters.

For example, if the US GDP for the first quarter of 2008 falls to a negative growth of say 1%, and then the second quarter of 2008 GDP also falls to a negative growth of say say2%, then the US economy would be considered in recession.

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During the recession, across the economy, business activity slows down, companies produce less, unemployment increases, people’s income falls, and trade shrinks.  Not a pretty picture! 

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We have had a few recessions in the recent times.  For example, the energy crisis caused recession from 1979-1980, inflation and higher interest rates in 1982-83, credit crisis in early 1990-91, and Dot Com bubble burst in early 2000-01.  However, the 1990 and the 2000 recessions are technically not recessions, because the GDP declined for only one quarter.    

 

What is a depression? .

If recession continues for a longer period, and larger decline in the business activity occurs, then it is called depression.

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One of the major depressions in the US history, called “the Great Depression of the 1930s” occurred in two parts.  From August 1929 to March 1933, the GDP declined almost 33%!  Then again, from May 1937 to June 1938, the GDP declined close to 18%!

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These were tough times in US history. Many people lost their jobs, had no money to buy food, and basic necessities.  Food lines could be seen in cities across the nation, where people stood in lines for hours to get some basic food, such as, bread. 

 

 

 

 

 

 

 

 

 

 

 

 

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