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Introduction to Global Recession Vs Global Depression

Introduction to Global Recession & Global Depression

Global Recession is a decline in the economic state all around the world. The International Monetary Fund also known as IMF uses a broad set of ideas to calculate the recessions around the world, which includes per capita gross domestic product worldwide. This drop in the economy can be for few months, it is clearly visible industrial production, employment, real income and wholesale-retail trade. A recession is just one of the part of the business cycle which is albeit unpleasant. These may be one-time crisis events can often trigger the onset of a recession.

There can be huge risks involved in the investment strategies used in the financial organizations along with the global nature of the financial system and this was brought to the limelight by a recession in the year 2007-2009. As a result of such massive global recession, the developed and developing nations had to face certain setbacks. There have been a number of government policies formulated in order to prevent any kind of such huge recession in the future. Generally, a recession lasts from six months to eighteen months and the interest rates usually fall in these months to stimulate the in an economy.

As stated by IMF, there have been 4 global recessions since world war 2, 1975, 1982, 1991, 2009. 2009 recession that which took place was the deepest and widest of them all. And then since 2010, the world economy has been recovering slowly.

Global Depression is an extension of a recession that has years, not quarters of economic contraction. It is a severe downturn that would last for several years. There was one the biggest global depression named great depression that has lasted for more than 10 years.

And as records say the magnitude could be like 1930: -8.6% ; 1931: -6.5% ; 1932: -13.1% ; 1933: -1.3% ; 1938: -3.4% and during the great depression the unemployment rate was around 25% wages have fallen down to 42%. The total of U.S. economic output fell from $103 to $50 billion you can clearly how badly the economy is getting affected.

An economic depression is devastating that, it almost takes a storm to create one. Many experts say that depression becomes more intensified by contractionary monetary policy. There was initially as the slow decline in the market on the year 1920, but once the stock market crashed, the Fed kept increasing the interest rates to defend the global standard. They did not supply the money to the market with excess but then made the money supply fall up to 30%, that has resulted in the decline in the prices by 10% each year. The whole procedure created a massive deflation in the economy. Thereby real estate prices also crashed to 25%.