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Economic Recession – Attributes and Possible Predictors


Economic Recession – Attributes and Possible Predictors

In a broader prospect, a nation’s economy is dependent upon the production and consumption of goods and services in that particular country. Thus, both the production and consumption are interlinked to each other, and they affect the economy of a country on the whole. When an economic recession sets in, it creates a disturbance in the proper balance between production and consumption.

Several economists have tried to explain and define economic recession based on their theories. One thing that is common in all the definitions is the ‘decline’ – decline in GDP, employment, investment, and stock market, which leads to the breakdown of the economy. An economic recession is usually involved with falling prices (deflation), or otherwise rise in prices (inflation). This leads to an economy collapse.

Attributes of an economic recession:

An economic recession has several attributes which can concurrently occur. These include sharp decline in employment, investments, and business profits.

A severe downfall in the GDP of a country, accounting to upto 10%, is referred to as an economic recession.

Predictors of an economic recession:

There are no exact and perfect predictors of an economic recession. However the economists have counted on the possible predictors to foretell the onset of an economic recession and warn investors, businessmen and common man regarding it. Here are some of the indicators:

In the United States, an economic recession has often been proceeded by a considerable setback in the stock market. However, about 50% of cases demonstrated a decline in the stock market only after the recession had completely set in.

Economists have come up with different types of models to predict and tell the effects of recession. However, none of the models are accurate. The best and possible predictors of recession are the effects it has on day today life – decline in stock market, price rise of gas, unemployment, layoffs, etc.

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