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Is K the new U? How economic recovery may be K-shaped
The rising profits of firms such as Amazon and Nike throughout 2020 shows that strong firms may be getting stronger, whilst smaller firms and hard-hit industries will struggle to recover.
Some economists like to describe any post-recession recoveries based on the letter they most closely resemble.
Here are a few examples:
- 'U-shaped': a longer period of stagnation before recovery
- 'V-shaped': a much faster recovery
- 'W-shaped': a short period of recovery followed by another recession (aka 'double-dip recession)
A 'K-shaped' recovery shows a split in how different industries, households and firms emerge from a recession. This may have been caused by consumers choosing to buy from firms they were most comfortable with during uncertain times - thus bolstering the market shares of big name brands.
This recovery would also have an effect on income and wealth inequality, with asset-owning households (who own shares in large firms) likely to suffer less financially as a result of the pandemic.
If you haven't already, check out the free Financial Times subscription that students aged 16-19 can access through their schools. It's a great way to find interesting examples to use in your answers and also to read some quality journalism!