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Prosperity or expansion is state of affairs in which real income is generated, the level
of employment is high and there are no idle resources or unemployed workers, or very few
of either.
With the passage of time, the economy gets distorted giving way to recession, during which
all the macroeconomic variables start declining.
Once recession begins, it tends to feed upon itself like
a forest fire. The signs of recession are: decline
in general prices, freezing of bank loans and construction activities, and so on. The
cumulative wave of liquidation, that sets in the stock
market and money market, gets passed on to the commodity markets and other markets,
turning into a regular depression.
Since it is the age of globalization, once an economy is affected by recession, it spreads
to other economies. The recent recession, which started in the US economy, slowly affected
other economies of the world. So, economic
fluctuation is part and parcel of the economic activity of
any country. Because once an economy tends to be
on the rise, it might not sustain for quite a long
period of time. But once recession starts, it must
be arrested, otherwise it will turn into
depression, which is very dangerous.
There is an old joke among economists: "Recession is, when your neighbor loses his
job and depression is, when you lose yours."
In economics, there is no absolute difference
between the two. Rather, the difference is in relative
terms; i.e., the difference between recession and depression is one of degree only and not in
kind. Recession, when carried to extremes, gives rise
to depression - the symptoms are the same. |
