Define Recession :
Generally Recession is defined as a period of reduced economic activity.
A period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters. A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market
Types of Recession :
There are four types of recession.
- V- shaped
- W- shaped
- U-shaped
- L-shaped
V Shaped Type:
The V recession is one where activity drops drastically, but quickly recovers, the left arm of the V being the drop, and the right arm, the recovery. While unpleasant, they are short-lived. Everybody on Wall street hoped that the current economic downturn would be a V type recession.
W Shaped Type
The W recession is sometimes referred to as a “double-dipped” one, where there is a violent drop in economic activity, a strong and quick recovery and then another equally (or worse) drop but followed by a slightly slower recovery.
U Shaped Type
The U recession is what most analysts are saying we are currently experiencing, whereby there is a sharp drop which gradually gets worse, bottoms-out and then recovers quite dramatically, back up to the levels that it enjoyed before its descent. Therefore, market analysts who believe this think that the “recession” will be over at the end of 2010.
L Shaped Type
The L recession really describes a depression, characterized by a steep decline in economic activity, followed by a prolonged period, sometimes several years, of little or no growth.
While it is easy to think of the Dow Jones Industrial Average (or S&P 500, or NASDAQ) as little more than reflections of what an economy is doing, they really aren’t as closely related as most people think
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