Being in cell phone industry I usually do not bother myself with lessons in economy, (I am far to busy keeping up with the all the technology news) having said that the latest economic developments in the world has me bushing up on my very rusty economic knowledge.
Are we in recession? Will it turn into an economic depression?
Let starts with what is the difference between a recession and a depression?
- Define recession and depression.
Recession is said to be a period of slowing down of the economy indicated by negative growth.Recession can also be defined as a short-term economic downturn.
An economic depression is a steep and sustained drop in economic activity featuring high unemployment and negative GDP growth.
2.Discuss the differences between a recession and a depression.
A recession is an economic downturn that can have an impact on employment and output while also lowering family income and consumption. Recessions are defined by a drop in output and employment and are a negative trend in the business cycle. Due to the decline in family income and spending, many firms and people are delaying making significant investments or purchases.
A depression has significantly more severe repercussions, including widespread unemployment and significant slowdowns in economic activity. While depressio
ns may have a worldwide impact, recessions may be more regional in nature. A depression is a significant downturn in the business cycle that is characterized by drastically decreased industrial production, high rates of unemployment, a serious slowdown of growth in the construction industry, and significant decreases in trade and capital flows on a global scale. A recession may be geographically confined (limited to a single country), but a depression (like the Great Depression of the 1930s) can occur throughout multiple countries. This distinction is in addition to the intensity and impacts of each.
3.Discuss the effects of a recession on the economy.
Families may be forced to postpone or skip sending their children to college due to job loss and declining finances. The development of ordinarily thriving small firms might be halted by frozen credit markets and weak consumer expenditure. Larger businesses could postpone or cut back on their R&D budgets.
The affects of a recession for businesses is staff reductions. Fewer workers will be able to do more work. While morale may deteriorate when hours are stretched, work becomes more taxing, salary increases are delayed, and the worry of further layoffs remains, productivity per employee may rise.
Management and labour may meet to discuss mutual sacrifices to rescue the business and preserve employment as the crisis worsens and lasts longer. The sacrifices can involve lower pay and less perks. If the business is a manufacturer, it can be obliged to shut down facilities and stop producing certain brands. For instance, automakers have done this in the past when there have been recessions.
5. Explain the effects of a depression on the economy.
Let's take a look at one of the most well known economic depression and the effects on the economy during that time.The U.S. economy was severely damaged by the Great Depression in 1929. All banks collapsed by one-third.
Homelessness grew, and unemployment increased. Housing prices plunged, global commerce fell apart, and deflation shot through the roof. The stock market's recovery took 25 years. All around the world, living standards abruptly dropped. As the demand for products and services declined, many businesses were forced to close, which raised the unemployment rate.
People lost their jobs, were forced out of their houses, and ended up on the streets all throughout the nation. Some people slept in parks or sewage pipes while swaddled in newspapers to keep warm. Others constructed improvised huts with leftover materials. Shantytowns, or small settlements made up of shacks, quickly arose. One of these communities was observed in Oklahoma City, as described by an observer: "Here were all these folks living in old, rusted-out automobile bodies.” People were residing in shacks constructed from orange boxes. One family was residing in a piano box and had a large number of children. People were sharing whatever junk they could find to live in. The destitute frequently begged or dug through trash cans.
Although the Great Depression had a significant negative impact on the United States, some positive outcomes emerged from it. For instance, the New Deal initiatives put in place measures to reduce the likelihood of another Depression. (Source:https://www.thompsonschools.org/cms/lib/CO01900772/Centricity/Domain/3627 Effects%20of%20the%20Great%20Depression.pdf)
Conclusion: Are we in recession, YES
Are we heading into en economic depression, NOT AS YET