Welcome to the Investors Trading Academy talking
glossary of financial terms and events.
Our word of the day is "RECESSION"
A recession is technically defined as two
consecutive quarters of shrinking output -- or
a country going backwards financially. The
eurozone is currently teetering on the edge
of recession, triggered in part by the crisis
which has rolled on since May 2010. A double
dip recession is when a country which has
been in recession enters a downturn again
after a brief and weak recovery.
A more technical explanation is when a significant
decline in activity across the economy, lasting
longer than a few months. It is visible in
industrial production, employment, real income
and wholesale-retail trade. The technical
indicator of a recession is two consecutive
quarters of negative economic growth as measured
by a country's gross domestic product.
A recession is a normal part of the business
cycle; however, one-time crisis events can
often trigger the onset of a recession. The
global recession of 2008-2009 brought a great
amount of attention to the risky investment
strategies used by many large financial institutions,
along with the truly global nature of the
financial system. As a result of such a wide-spread
global recession, the economies of virtually
all the world's developed and developing nations
suffered extreme set-backs and numerous government
policies were implemented to help prevent
a similar future financial crisis.
A recession generally lasts from six to 18
months, and interest rates usually fall in
during these months to stimulate the economy
by offering cheap rates at which to borrow
money.
The International Monetary Fund (IMF) uses
a broad set of criteria to identify recessions,
including a decrease in per-capita gross domestic
product. According to the IMF's definition,
this drop in domestic output must coincide
with a weakening of other macroeconomic indicators,
such as trade, capital flows and employment.
