Today in the class while explaining inflation a student had a confusion about difference between Inflation and recession. I addressed her doubt after the lecture. But, I feel other students must also have the clarity. Hence I am addressing it here.
Inflation is when prices continue to creep upward, usually as a result of overheated economic growth or too much capital in the market chasing too few opportunities.
A recession is a general slowdown in economic activity over a long period of time. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; bankruptcies and the unemployment rate rises.
Inflation may or may not effect recession, as recession is generally caused by shortage of money supply and not shortage of production.
Inflation is when prices continue to creep upward, usually as a result of overheated economic growth or too much capital in the market chasing too few opportunities.
A recession is a general slowdown in economic activity over a long period of time. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; bankruptcies and the unemployment rate rises.
Inflation may or may not effect recession, as recession is generally caused by shortage of money supply and not shortage of production.
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