Recession | Cause and Effect

What is a recession? A recession (economic downturn) is a decline in real Gross Domestic Product (GDP) for two or more consecutive quarters in a year (in other words, two successive quarters of negative economic growth). A recession can involve a simultaneous decline in economic indicators of overall economic activity, such as employment, investment, and corporate profits. Recession periods can be associated with falling prices (deflation) or a rapid rise in prices (inflation) during periods of stagflation.

Causes of economic recession:
- Economic downturns are caused by a combination of internal (endogenous) cyclical factors and external (exogenous) shocks such as oil prices, weather, or war.
- The Austrian school of economics holds that inflation by the money supply causes today's recession. Such downturns are positive drivers because they are the natural market mechanism that readjusts to resources underutilized during periods of "growth" or inflation.
- Most monetarists believe that radical changes in economic structure are not the primary cause. The cause of recessions in the US is poor money management.

Types of recession:
Economists often describe recessions in the shape of quarterly growth graphs. The following recessions are often mentioned:
V-shaped recession,
U-shaped recession,
W-shaped recession,
L-shaped recession.

Video Chapters
00:27 - What Causes Recessions
01:50 - Interest Rates
04:23 - The Bronze Recession

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