All countries experience regular ups and downs in the growth of output, jobs, income and spending.
A recession means a fall in the level of real national output i.e. a period when growth is negative, leading to a contraction in employment, incomes and profits.
A simple definition:
A more detailed definition:
There are many symptoms of a recession – here is a selection of key indicators:
The difference between a recession and a depression
1.Cuts in interest rates – the policy interest rate fell to 0.5% in the Autumn of 2008 and they have stayed at this low level since then
2.A rise in government borrowing
3.A policy of quantitative easing (QE) by the Bank of England to pump more money into the banking system in a bid to increase the supply of loans – now worth more than £375 billion.
Why is GDP growth difficult to forecast?
When economists make forecasts about the future path for an economy they have to accept the inevitability of forecast errors. No macroeconomic model can hope to cope with the fluctuations and volatility of indicators such as inflation, exchange rates and global commodity prices.
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