Context:
US stock markets are soaring even as the economy struggles to avoid recession. The US is experiencing a state of growth recession, where it is neither fully in recession nor growing to its full potential.
About Growth recession
- American economist Solomon Fabricant coined the phrase “growth recession”.
- It doesn’t limit its definition to just GDP contraction.
- It looks at other indicators such as unemployment as well as the depth and spread of economic
- troubles.
- Growth recession is something above zero but below potential.
- Instead of the GDP growth crashing and contracting, it has slowed down to a level significantly
- below its potential.
- A key marker of recession is the rise of joblessness or unemployment.
- Potential GDP growth rate of an economy?
- The potential GDP growth rate is that rate of growth at which an economy can grow without
- spiking inflation.
Frequently Asked Questions about Growth recession
A growth recession refers to a situation where an economy is neither in a full-blown recession nor experiencing robust growth. It is characterized by GDP growth that is below its potential but still positive. Economist Solomon Fabricant coined the term, taking into account not only GDP contraction but also other indicators such as unemployment and the depth and spread of economic troubles.
A regular recession typically involves a significant contraction in the GDP, negative economic growth, and a decline in various economic indicators such as employment, consumer spending, and investment. In contrast, a growth recession is characterized by GDP growth that has slowed down to a level significantly below its potential, but it remains positive. While a regular recession often associates with widespread economic hardship, a growth recession may indicate a more moderate slowdown in economic activity.
In addition to GDP growth, a growth recession takes into account other indicators such as unemployment, which tends to rise during a recession. It also considers the depth and spread of economic troubles, which could include factors like declining consumer spending, reduced business investment, or a slowdown in the housing market. By considering a broader set of indicators, a growth recession provides a more comprehensive assessment of the overall health of an economy.
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