Subject9. Macroeconomic equilibrium

9.1. Model of aggregate demand and aggregate supply

The analysis of equilibrium in the national market is carried out by combining the aggregate demand and graphs on the same coordinate axes. aggregate supply. The market system will be in a state of equilibrium if, at the current price level in the economy, the value of the expected volume of production in the economy is equal to the value of aggregate demand.

Intersection of curves aggregate demand and aggregate supply will thus determine the equilibrium real volume of domestic production and the equilibrium price level in the economy. The presence of three specific areas on the aggregate supply graph complicates the analysis somewhat. Let us consider the situation of establishing macroeconomic equilibrium in each specific section of the AS schedule.

The first case is the intersection of the schedules of aggregate demand and aggregate supply in the intermediate section of the latter. This case is the usual case when a change in the price level in the economy virtually eliminates overproduction and underproduction.

Macroeconomic equilibrium will be achieved at point E with the following parameters: Р E - equilibrium price level in the economy; Q E is the equilibrium volume of production in the economy.

If the price level is higher than the equilibrium level, then surplus products will appear on the national market. The presence of surplus (excess supply) will “push” prices down to the level corresponding to P E in the figure above. The opposite situation occurs if the price level in the economy is less than the equilibrium one. In this case, the economy will face the problem of shortages in the national market. A shortage of products will allow prices to rise to the original level, i.e., to R E. The possibility of changing the price level in the economy practically reduces the situation of overproduction and underproduction to zero, this allows the market system to self-regulate and be in equilibrium.

The next version of the equilibrium of aggregate demand and aggregate supply will be considered in the Keynesian section of the AS graph (figure below). A feature of this version of macroeconomic equilibrium is that the price level throughout the Keynesian segment is unchanged and equal to P E. This means that prices, unlike the case considered above, here cannot be an instrument of influence on the market situation. If we assume that the economy produces a larger volume of output than is demanded by the market, for example Q A (Q A > Q E), then the economy will face an increase in unsold inventories (by the amount of (Q A - Q B)), which will not be accompanied by fluctuations in the price level .

Responding to growth inventory, entrepreneurs will reduce production volumes, gradually bringing them to the level corresponding to point E. If the volume of production in a given economy is less than the equilibrium value, for example Q B, there will be a reduction in normal inventories. For manufacturers, this will be a signal of the need to increase production volumes, and the process of expanding production volumes will continue until the situation returns to normal, i.e. will not return to point E. All of the above allows us to conclude that on the Keynesian segment AS it is the state of inventories and their dynamics that act as a kind of indicator of the situation on the national market. Note that in both the first and second cases, macroeconomic equilibrium is achieved under conditions of underemployment and equilibrium GDP turns out to be less than the full abundance of potential GDP production.

And finally, the last case is the equilibrium of aggregate supply and demand on the classic section of the AS schedule. This option means that macroeconomic equilibrium is achieved under conditions of full employment of economic resources.

The real volume of domestic product here corresponds to potential GDP, i.e. GDP at full employment (Q max). Full employment in the economy eliminates overproduction and underproduction.

A situation of stable market equilibrium at the level of the entire national economy is the exception rather than the rule, and is quite rare, since aggregate supply and aggregate demand are influenced by many factors.

A rapid change in aggregate demand or aggregate supply will cause a disturbance in the macroeconomic equilibrium. In the economic literature, sharp changes in aggregate demand or aggregate supply are called demand shocks and supply shocks, respectively.

A demand shock may arise, for example, due to a significant increase in money supply(let’s say the government could resort to issuing money to pay off its debts). A demand shock can be caused by fluctuations in the investment activity of businesses (for example, in conditions of economic recovery, investment expenses increase sharply), and the rush demand of the population, frightened by rumors about a possible increase in prices, and a sharp influx of imported goods (for example, as a result of the liberalization of foreign regulations). economic activity) and other reasons. A supply shock most often occurs due to a sharp change in production costs, which, in turn, may be associated, for example, with an increase in world energy prices, or with a large influx of immigrants that sharply increases the supply of labor, or with the rapid introduction of new technologies and etc.

Let us first analyze how changes in aggregate demand will affect the equilibrium parameters of the national market. These figures illustrate the increase in aggregate demand.

Consider the option of reducing aggregate demand. If the economy is in a state of recession (the Keynesian section of the aggregate supply schedule), then a reduction in demand throughout the entire economic system will result in a decrease in production volumes and an increase in unemployment. The general price level will remain unchanged. Thus, we will encounter a situation opposite to the case considered in the figure. By analogy, we can assume that when the AD and AS graphs intersect at the intermediate or classic sections of the aggregate supply curve, a downward change in aggregate demand should cause a decrease in the price level in the economy and the volume of GDP. However, practice shows that, having increased once, prices almost never fall to the previous level, even with a decrease in AD. If they decrease, it is only slightly. This is explained as follows.

1. The main component of the price of any product is production costs, most of which are wages. A wage almost never decreases, i.e. it is inelastic downward, since there is a legally established minimum wage; trade union organizations, defending the interests of their members, prevent wage reductions; Entrepreneurs themselves are afraid of disincentivizing labor productivity and losing their most qualified personnel.

2. The second reason for downward price inelasticity is the significant monopolization of most modern commodity markets and, as a consequence, the ability of monopolies to maintain prices even when demand in the market decreases.

The described situation (associated with the inelasticity of prices to decrease) is called the ratchet effect. Let's consider its graphical interpretation (see figure below). Let us assume that initially equilibrium in the economy was achieved at point A in the Keynesian section. Let us now assume that, for some objective economic reasons, aggregate demand has increased and the AD 1 curve has shifted to position AD 2 on the plane. Equilibrium has moved from point A to point B, located on the classic section of the AS graph. Such a change in the macroeconomic situation led to an increase in the price level from P A to P B and increased the volume of real GDP from Q 1 to Q max. Let us further assume that, under the influence of non-price determinants, aggregate demand has decreased and the AD curve returns to its original position, that is, it shifts to the level AD 1. Due to the ratchet effect, this change in aggregate demand will not lead to a change in the price level in the economy.

To maintain equilibrium parameters, the Keynesian segment moves up to the position P B B, and the aggregate supply schedule itself will now be represented by the broken line P B BAS. Now the equilibrium of the economic system is achieved at point D, with equilibrium parameters P in and Q 2.

The next stage of our analysis will be related to the study of the impact of changes in aggregate supply on macroeconomic equilibrium (see figure below). If for some reason aggregate supply increases, this will be accompanied by an increase in the volume of national production (from Q A to Q B) with a general decrease in the price level (from P A to P B). This situation means an upturn in the economy.

In the event of a reduction in aggregate supply in the economy, so-called supply inflation (cost inflation) will occur - a shift of the AS curve to the left and up to position AS 2 will entail a simultaneous reduction in GDP (from Q A to Q c), an increase in unemployment and an increase in the aggregate price level ( from R A to R s). Thus, the economic system will experience a decline in production (stagnation), accompanied by inflation. This situation in the economy is called stagflation.

In most cases, supply and demand shocks lead to inactive consequences. The state is taking a number of stabilization policy measures aimed at maintaining macroeconomic balance and minimizing the negative consequences of shocks. These measures include elements of monetary and fiscal policy.

For your information. Considering demand and supply shocks, we found that with an increase in aggregate demand (in particular in the vertical and ascending sections of the aggregate supply schedule), the price level in the economy will increase. We will observe a similar increase in the price level when aggregate supply decreases. In fact, in the first case we are talking about demand inflation and in the second case about supply inflation.

9.2. Cyclical development market economy

Phases economic cycle

It is typical for all countries with market economies cyclical development- after a prolonged increase in economic activity, at a certain point there is a decline in this activity. The governments of many countries strive to achieve constant economic growth, but so far not a single country has succeeded.

Scientists and practitioners argue that fluctuations occur in any economic system business activity over time: an increase or decrease in demand, an increase in production volumes or its decline, an increase or decrease in unemployment, etc. This was noticed by economists at the beginning of the 19th century (T. Malthus, J. Sismondi), and then T. Veblen, J. Keynes, J. Hicks, J. Clark, K. Marx, J. Schumpeter, W. Mitchell and many others devoted their activities to research economic cycles. They discovered, firstly, such a feature of a market economy as a tendency to repeat economic phenomena, and, secondly, a certain sequence in the alternation of these phenomena (the presence of economic cycles).

Economic cycle- these are periodic fluctuations in business activity in the economic system, which are characterized by a time interval between two qualitatively identical states of economic conditions. The economic situation refers to the direction and degree of change in the main macroeconomic economic indicators. Thus, economic cyclicality development presupposes a deviation of the national economy or the world economy as a whole from the state macroeconomic equilibrium.

Fluctuations in market activity in different countries vary quite greatly in regularity, duration and reasons for their occurrence, however, all cycles have the same phases. Modern concepts of the cyclical nature of a market economy mainly distinguish two- and four-phase business cycle models.

Two-phase model has a downward ( decline, crisis, recession) and upward ( revival, rise) phases, as well as the lowest and highest turning points of the cycle, respectively. Cycle length is defined as the interval between two adjacent high or low turning points.

The four-phase model contains the following economic cycle phases: crisis, depression, revival and recovery.

Recession (crisis). It lasts from several months to two years. In the course of it, there is a reduction in production and investment, a drop in sales volumes, an increase in the number of bankruptcies, a reduction in employment and the achievement of high unemployment, a decrease in wages, an increase in inventories of goods, and a depreciation of the exchange rate. valuable papers, rising world prices for energy and food. Non-monopolized organizations and small businesses are most susceptible to crisis impacts. Manufacturers of food products, consumer goods and services (especially everyday items) are less dependent on crisis phenomena.

Reduction in business activity, relatively moderate non-critical decline in production, slowdown economic growth called recession. Recession- this is a decline in national production that has continued for more than 2 quarters in a row.

The balance is disrupted not only in individual (local) markets, but also in the entire economic system, that is, the macroeconomic balance is disrupted. Thus, the crisis arises as a general overproduction, accompanied by a rapid decline in production, rising unemployment, bankruptcy of banks and other credit institutions due to massive non-repayment of loans.

After production and employment fall to their lowest levels, the crisis transitions into depression (stagnation), which lasts from one to three years. In this phase, management carries out uncertain, sometimes contradictory actions, since during a crisis incentives arise to reduce production costs and renew fixed capital on a new technological basis. The bank interest rate falls to minimum levels. Society and market structures are in a state of wait-and-see, production and employment are slowly picking up speed. During this period, the national economy adapts to new conditions and needs of the economy.

Revival. This phase is characterized by an increase in business activity, a gradual increase in demand for labor and, consequently, a reduction in unemployment, expansion of production, and rising prices. Manufacturers are beginning to receive more and more new orders, equipment is being updated, new enterprises are emerging, investments are increasing, and interest rates. As a result, consumer demand increases and the pre-crisis level of the economy is achieved.

Rising phase characterized by a significant expansion of production, an increase in entrepreneurial and investment activity, an increase in consumer spending, and a significant increase in the general price level in the economy. Many new enterprises are emerging, new technologies are being introduced, new jobs are appearing in large numbers, and unemployment is decreasing. Stock prices, interest rates, and salaries are rising, and small businesses are actively developing. At the same time, inventories are increasing, the strain on banking assets is growing, and investments in production and non-production areas are growing disproportionately. Tension increases in proportions between the stages of the reproductive cycle at the macro and micro levels.

During the end of the boom economy operates at its maximum capacity, there is full employment, overproduction of goods, investment and consumer spending are very high. Economic activity reaches its highest level. Having reached this point, the economy again begins to slide into crisis, and the economic cycle repeats at a new quantitative and qualitative level.

Just because there are four phases of the business cycle does not mean that they are all present in every cycle. There may be situations where some phases are missing. Let's say the economy moves from the crisis phase, bypassing depression, to recovery. Or, for example, the recovery did not develop into an economic recovery, and the economy went into recession again.

P. Samuelson in his book “Economics” defines the economic cycle as a common feature of almost all areas of economic life and all countries with a market economy. Modern economists recognize the objective nature of the business cycle and therefore propose to study this phenomenon by analyzing the causes and factors that influence the nature and duration of cycles.

Currently exists three theoretical approaches, characterizing and defining causes of economic cycles.

1. First approach explains the occurrence of cycles external (exogenous) factors, causing periodic repetition of economic processes and lying outside the economic system. These include: political events, wars, earthquakes, population changes, the discovery of large deposits of valuable natural resources, innovations, inventions and scientific discoveries, solar activity.

For example, the English economist W.S. Jevons tried to explain the cause of the economic cycle by the periodicity of occurrence and intensity of sunspots. According to this concept, the 11-year cycle of solar activity causes fluctuations in crop yields, which lead to periodic crop failures in agriculture and, as a consequence, to the industrial and trade cycles, to a general economic decline.

Theories that explain the business cycle by the presence of external factors are called external. Their analysis and development were carried out by J. Schumpeter, H. S. Jevons, H. M. Mohr, S. Oji, E. Mandel.

2. Supporters second approach claim that cycles are caused by internal (endogenous) factors- phenomena occurring within the economic system itself. The most important of them are processes such as consumption, investment, and economic policy of the state(s).

According to underconsumption theories(J. Sismondi), depressions are caused by the fact that too much of current income is saved and too little of it is spent on consumer goods. It is the savings made by individuals and companies that upset the balance between production and consumption. The reason for such excessive savings is the unequal distribution of income, since the vast majority of savings is concentrated among high-income earners.

Overaccumulation theory explains the emergence of cyclicality in the economy by the excess of production of means of production over the production of consumer goods. Central to this concept is the issue of excessive development of industries producing capital goods relative to industries producing consumer goods. This phenomenon is a symptom of serious imbalances in the structure of social production that arise during the boom phase.

Monetarist theories interpretations of economic cycles (R. Hawtry, I. Fisher, M. Friedman) are based on disturbances in the field of monetary circulation. For them, the cycle is a “purely monetary phenomenon” in the sense that changes in cash flow are the only and sufficient reason for changes in business activity, the alternation of boom and depression. When there is demand for goods in society, that is, cash flow, increases, trade becomes brisk, production expands, prices rise. When aggregate demand decreases, trade weakens, production declines, and prices fall. Cash flow is directly determined by “consumer spending,” that is, spending at the expense of income. If cash flow could be stabilized, fluctuations in economic activity would disappear. But this does not happen, since the monetary system is inherently unstable.

Marxist theory explains the reason for the emergence of economic cycles by the main contradiction of capitalism - between the social nature of production and the private capitalist form of appropriation of the results of labor. Proponents of this theory believe that the possibility of cyclicality follows from the functions of money as a medium of exchange and a means of payment when acts of purchase and sale are broken in national economy. With the accumulation of capital and the growth of productive forces, there is an increasing concentration and centralization of capital, the formation of industrial centers and transnational corporations. Goods become the result of the labor of many millions of workers, but their appropriation remains private capitalist.

Keynesian direction and neoclassical concepts cycle are based on the fact that the cause of the cyclical mechanism is the process of adaptation of the capital stock to the conditions of social reproduction. It is assumed that between the volume of value created annually (“flow”), on the one hand, and accumulated at this moment“reserve” of capital – on the other hand, there is an equilibrium proportion. As long as this equilibrium proportion is not disturbed, cyclical fluctuations cannot occur. And vice versa. At the same time, fluctuations occur in both production and capital.

Neo-Keynesians(J. Hicks, P. Samuelson, E. Hansen) believe that in changes in this proportion an active role belongs to the movement of capital: the desire of entrepreneurs to equalize the actual capital with its equilibrium level, which is the optimal value for neo-Keynesians.

Modern economic theory is associated with Samuelson-Hicks business cycle model, which describes the process of transition of the economy from one equilibrium state to another when exogenous parameters change. It views the cycle as the result of the interaction of national income, consumption and capital accumulation. According to this model, the mechanism of economic fluctuations is characterized by a multiplier and an accelerator.

Proponents of neoclassical theory(J. Dusenberry) the primary one is the movement of flow - the volume of annual production. They believe that balance is lost during economic development as a result of the interaction of such macroeconomic factors as profit, unemployment, and investment. The main reason that gives rise to the undulating movement of the economy is the deviation of actual employment of the population from its equilibrium value.

Of great importance in the development of these concepts are mathematical models economic cycle, built on the idea of ​​fluctuations in the flow of investment ( theories of investment in fixed capital and theories of investment in working capital).

Psychological theories cycle play a major role in the occurrence of cyclical fluctuations or speculative motives in the operations of entrepreneurs on commodity markets and stock exchanges, that is, motives associated with expectations of a further increase in prices and securities rates (W. Jevons, V. Pareto), or unfounded expectations by entrepreneurs of a high level of their actual income (A. Pigou, J. Keynes).

3. Third approach boils down to the fact that the cyclical nature of a market economy is caused by a combination of both external and internal reasons. According to this concept, internal factors are the main, basic ones, leading to economic fluctuations, and external ones give the initial impetus to the cycle, the reason for the onset of crisis phenomena. This direction is the most productive and positive.

The economic cycle can last from several years to several decades. In economic theory, cycles lasting up to 10 years are usually called small (or short) waves, lasting up to 40-60 years - large (or long) waves. The latter are associated with fundamental shifts in technology and technology, with scientific and technological revolutions.

Despite the phases common to all cycles, individual cycles differ significantly from each other in duration and intensity.

Duration of economic cycles depends on many factors:

time of renewal of fixed capital,

dynamics of market conditions,

government intervention in the economy, and many others.

Accordingly, modern economic science distinguishes short, medium and long term cycles.

Cycles by J. Kitchin have a duration of three to five years. This short cycle time reflects the average production cycle of an industrial firm with taking into account R&D and frequency of oscillations exchange rates. As part of this cycle, individual elements of fixed capital are updated and inventories at production enterprises change.

Medium-term cycles include industrial(classical) and construction cycles. So, cycles of K. Zhuglar reflect the interaction of many monetary factors, their connection with investment cycles and changes in macroeconomic indicators, which is why they are most often called industrial cycles. Their frequency is 7-12 years. The industrial cycle is associated with the renewal of fixed capital, the creation and implementation of new equipment and technologies.

Cycles by S. Kuznets represent construction cycles, associated with fluctuations in supply and demand in the housing construction market, as well as in the market for the construction of buildings and structures. The duration of these cycles is about 20 years, during which residential buildings and industrial structures are renewed.

Recessus- retreat) - in economics (in particular, in macroeconomics), the term denotes a relatively moderate, non-critical decline in production or a slowdown in economic growth. The decline in production is characterized by zero growth in gross national product(GNP) (stagnation) or its decline for more than six months.

A recession is one of the phases of the economic cycle (conjuncture), following a boom and giving way to depression.

A recession most often leads to massive drops in stock market indices. Typically, the economy of one country depends on the economies of other countries, so economic recession in one country or another can lead to a recession in the economies of other countries and even to a collapse on world markets (see Black Thursday). Recessions are also characterized by many other signs of cyclical crises, for example, rising unemployment.

Causes

The causes of recessions can be different; explanations for recessions are closely related to the concept of business cycles in the economy. Various economic schools The causes of a recession are defined differently; in addition, various economic fluctuations, recessions have different causes. Cycles and corresponding recessions of long waves by N. D. Kondratiev are explained by the change technological structures. The reasons for the recession in Western countries and in Russia also differ. The last recession in the US and Western countries was triggered by the situation in financial markets and the securities market, primarily mortgage-backed securities. The 2001 recession in the United States is associated with a fall in investment and a decrease in efficiency in new sectors of the economy, such as information Technology. The 2008 recession in Russia is associated with a fall in world oil prices, low level production volumes in non-resource sectors of the economy, contradictory government policies. The continuation of the crisis in Russia in 2010 and 2011 is associated with the so-called “raw materials curse”, the growth public sector economy, rising taxes, lack of reforms in the law enforcement system, leading to inequality of market participants, monopolization of the economy. Politicians often have their own ideological explanations for recessions; recessions often lead to populists and leftist forces coming to power.

About the terms “recession”, “economic crisis”, “depression” and “financial crisis”

In the old days we suffered from periodic economic crises, the sudden onset of which was called “panic”, and the prolonged period after the panic was called “depression”. The most famous depression of modern times is, of course, the one that began in 1929 with a typical financial panic and continued until the outbreak of World War II. After the 1929 disaster, economists and politicians decided that this should never happen again. In order to cope with this task successfully and without much hassle, it was only necessary to eliminate the word “depression” from use. From that moment on, America never had to experience depression again. For when another severe depression occurred in 1937-1938, economists simply refused to use this terrible name and introduced a new, more euphonious concept - recession. Since then, we have already experienced many recessions, but not a single depression. However, pretty soon the word “recession” also turned out to be quite harsh for the refined feelings of the American public. Apparently, our last recession was in 1957-1958. Since that time, we have experienced “downturns”, or even better “slowdowns”, or even “deviations”.

Notes

see also

Links

• Recession of the American economy - background, opinions, analytics.
• Bryzgalin A.V. Crisis and taxes. TAXES AND FINANCIAL LAW, 12/2008
• Akaev - WILL THE SECOND WAVE OF THE GLOBAL RECESSION COME IN JULY-AUGUST 2011?

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Synonyms:

See what “Recession” is in other dictionaries:

Recession- a phase of the economic cycle characterized by a weak but steady deterioration in economic indicators, primarily a decline in GDP. Also, during a recession, unemployment increases, the volume of investment in fixed capital decreases, slightly... ... Banking Encyclopedia

recession- recession A slowdown or fall in the growth rate of the gross national product. A deep recession is called “depression.” The process of economic growth is, as a rule, cyclical in nature: from boom to... Technical Translator's Guide

A reduction in the production of real national product lasting six or more months. In English: Recession See also: Economic cycles Financial Dictionary Finam. Recession A slowdown or decline in the growth rate of gross national... Financial Dictionary

- [lat. recessus retreat] 1) geogr. sea ​​tide; 2) geogr. glacier retreat; 3) economical slight or short-term economic DEPRESSION, stagnation, drop in economic activity; fall in market conditions (CONJUNCTURE). Dictionary… … Dictionary of foreign words of the Russian language

Recession- (recession) a time-limited decline in production or a slowdown in the rate of its growth (capable of developing into a full-scale economic crisis). The duration of a decline sufficient to be called a recession is estimated by different... ... Economic and mathematical dictionary

Recession, break Dictionary of Russian synonyms. recession noun, number of synonyms: 4 depression (30) stagnation ... Synonym dictionary

A decline in production or a slowdown in its growth rate. Dictionary of business terms. Akademik.ru. 2001... Dictionary of business terms

A relatively moderate, non-critical decline in production or slowdown in economic growth. Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B.. Modern economic dictionary. 2nd ed., rev. M.: INFRA M. 479 p.. 1999 ... Economic dictionary

RECESSION, recessions, many. no, female (from Latin recessio retreat) (biol.). Gradual disappearance, removal of some hereditary characteristics in the body. Ushakov's explanatory dictionary. D.N. Ushakov. 1935 1940 ... Ushakov's Explanatory Dictionary

A break in sedimentation without a change from sea to land. Observed on the bottom of the seas, in the region. strong bottom currents that carry away all sediments and even erode the seabed. See Scour. Geological Dictionary: in 2 volumes. M.: Nedra. Edited by K. N. Paffengoltz... Geological encyclopedia

English recession; German Rezession. 1. Temporary decline in production or slowdown in its growth rate 2. Return of conquered territories. Antinazi. Encyclopedia of Sociology, 2009 ... Encyclopedia of Sociology

(recessio; lat. retreat, distance; syn. retroposition)
surgical operation: correction of strabismus, which consists of moving posteriorly the site of attachment to the sclera of one of the external muscles of the eye.

View value Recession in other dictionaries

Recession— recessions, plural no, w. (from Latin recessio - retreat) (biol.). Gradual disappearance, removal of certain hereditary characteristics in the body.
Ushakov's Explanatory Dictionary

Recession- relatively moderate, non-critical decline in production or slowdown in economic growth
growth.
Economic dictionary

Recession, Decline, Economic Crisis— A decline in economic activity, defined by many economists as a decline in the gross domestic product for at least two consecutive quarters.
Economic dictionary

Recession (recession, Recession)— Slowdown or decline in the growth rate of gross national product. A deep recession is called “depression.” The process of economic growth........
Economic dictionary

Recession- - relatively moderate, non-critical decline in business activity, production, slowdown in economic growth, usually defined as sequential........
Legal dictionary

Recession- (recessio; lat. retreat, distance; syn. retroposition) surgical operation: correction of strabismus, which consists of moving posteriorly the place of attachment to the sclera........
Large medical dictionary

Recession- a phase of the economic cycle characterized by a weak but steady deterioration in economic indicators, primarily a decline in GDP. Also, during a recession, unemployment increases, the volume of investment in fixed capital decreases, and the general standard of living of the population drops slightly, especially those who receive wages or income from business (as opposed to recipients government payments and rentiers whose situation does not worsen).

In some countries various organs government controlled officially announce the onset of a recession under certain circumstances. For example, in the USA, the business cycle committee of the National Bureau of economic research defines a recession as “a significant decline in business activity throughout the economy over several months, usually reflected in a deterioration in real GDP, real income, employment, industrial production and retail" In the UK, a recession is recorded by the Office for National Statistics when GDP declines for two consecutive quarters.

There is a common joke among economists and the business press to explain the difference between a recession and an economic depression: “If your neighbor loses his job, it’s a recession; if you lose your job, it’s a depression.”

There is a well-known paradox associated with the definition of a recession: given that data on quarterly changes in GDP in developed countries are published with a long delay and may subsequently be significantly revised, the official announcement of the onset of a recession is often made several months after it has already ended. At the time of the announcement of the onset of a recession, the country's economy is either in a state of severe crisis or at the stage of a new recovery. Accordingly, official recession data are mostly of historical interest and do not reflect behavior economic entities. Therefore, forecasting GDP fluctuations, based on indirect indicators and not highly accurate, plays a significant role in economic decision-making by the government and entrepreneurs. At the same time, in modern economic science There is no consensus on the causes of the recession and how to quickly overcome it.

Economists distinguish several types of recessions - according to the conventional form of the graph of changes in GDP. A V-recession is characterized by a relatively strong and rapid decline in GDP (not reaching, however, the level of depression) with a clearly pronounced single dip and subsequent rapid recovery to the previous level. A U-recession is characterized by a relatively long and stable (without up-and-down) stay of GDP at a low level, followed by a rapid recovery. During a W-recession, there is a short-term “bounce” in the chart GDP growth into the positive area in the middle of a recession, i.e. it is like two V-recessions in a row. Finally, an L-recession refers to a rapid decline in GDP followed by a long, smooth recovery.

A recession most often leads to massive drops in stock market indices. As a rule, the economy of one country depends on the economies of other countries, so an economic downturn in one country or another can lead to a downturn in the economies of other countries and even a crash on world markets (see Black Thursday). Recessions are also characterized by many other signs of cyclical crises, for example, rising unemployment.

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Causes

The causes of recessions can be different; explanations of a recession are closely related to the concept of business cycles in the economy. Different economic schools define the causes of recession differently; in addition, various economic fluctuations and recessions have different causes. N. D. Kondratiev explains the cycles and corresponding recessions of long waves by a change in technological structures. The reasons for the recession in Western countries and in Russia also differ. The latest recession in the United States and Western countries was provoked by the situation in the financial markets and the securities market, primarily mortgage-backed securities. The 2001 recession in the United States was associated with a fall in investment and a decrease in efficiency in new sectors of the economy, such as information technology. The 2008 recession in Russia is associated with a fall in world oil prices and a low level of production in non-resource sectors of the economy. The continuation of the crisis in Russia in 2010 and 2011 is associated with the so-called “raw materials curse”, the growth of the public sector of the economy, rising taxes, the lack of reforms in the law enforcement system, leading to inequality among market participants, and monopolization of the economy.

About the terms “recession”, “economic crisis”, “depression” and “financial crisis”

In the old days, we suffered from periodic economic crises, the sudden onset of which was called a “panic”, and the prolonged period after the panic was called a “depression”. The most famous depression of modern times is, of course, the one that began in 1929 with a typical financial panic and continued until the outbreak of World War II. After the 1929 disaster, economists and politicians decided that this should never happen again. In order to cope with this task successfully and without much hassle, it was only necessary to eliminate the word “depression” from use. From that moment on, America never had to experience depression again. For when another severe depression arrived in 1937-1938, economists simply refused to use this terrible name and introduced a new, more euphonious concept - recession. Since then, we have already experienced many recessions, but not a single depression. However, pretty soon the word “recession” also turned out to be quite harsh for the refined feelings of the American public. Apparently, our last recession was in 1957-1958. Since that time, we have experienced “downturns”, or even better “slowdowns”, or even “deviations”.