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Inflation is continuous increase in the prices. The rate of inflation sways as the money supply in the system increase or decrease. The Central Bank thus works on this concept. It slows down the economy to tame inflation. It uses different tools to control the inflation rates within a specific range favorable for the economy. Most common tool is the interest rates. When there is excess of money in the economy the central bank increases the interest rates and when the money in the system decreases the bank cuts down the interest rates to increase the demand and spending. Recession on the other hand is a decline in the economic activities for a quarter or more. Recession is thus characterized by a decrease in GDP, decline in employment, increase in unemployment, decline in industrial production and consumer price index and decrease in the housing prices. Recession is said to occur when the GDP shows a decline of ten percent or more. Depression is a term which is confused with recession. Depression is in fact more severe form of recession. Depression is said to occur when the economy faces more severe frequent fall in GDP. There are many factors which contribute to recession. But the most common one is either an increase or decrease in the prices. Increase in the prices discourages spending which affect the GDP adversely leading to recession. On the contrary inflation is caused when there is excess of money in the system. As the money in the system increases, the spending increases. This increases the demand. Prices increase when the supply is not able to meet the demand. And this sudden increase in prices reflects in the GDP and consumer price index, common measure of the inflation rates. Thus as the inflation rates increase the central bank increases the interest rates. This discourages spending and promotes saving. As the demand falls down and spending decline it leads to a decline in the production. A high inflation phase follows recession. The best part that recession thus plays is it reduces inflation. But it is commonly seen that the prices do not decline during recession. This is because the economy is still expanding, growing at a slow pace due to which the money supply in the system still remains. This is the situation that we face today. The economy is facing recession; the stock markets are melting down and the government is doing every bit to cut down the interest rates to encourage spending and revive the real estate market. But the prices of the commodities like food and oil still remain high.

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What is the difference between recession and depression?

The difference between the depression and a recession is a recession is the down on an up and down rollercoaster. While the depression, there was no way to tell when it would end.


What is the difference between recession and inflation?

Recession is a period of economic decline characterized by a decrease in economic activity, while inflation is a general increase in prices of goods and services.


What is difference between depression and a recession?

A recession is a low point in the economy. A depression is an extreme low point in the economy that lasts a long period of time. We are at a recession, in the 1930's their was a depression in the US.


What is the difference between a reccession and a depression?

Recession refers to a temporary economic decline whereas a depression is a period of prolonged downturn in economic activity


How does the relationship between inflation and recession impact the overall economy?

The relationship between inflation and recession can impact the overall economy in a significant way. When inflation is high, it can lead to a decrease in consumer purchasing power and a rise in production costs, which can slow down economic growth and potentially lead to a recession. On the other hand, during a recession, inflation may decrease as demand for goods and services falls, which can help stimulate economic recovery. Overall, finding a balance between inflation and recession is crucial for maintaining a stable and healthy economy.

Related Questions

What is the difference between recession, depression, and inflation?

Recession is a period of economic decline, depression is a severe and prolonged recession, and inflation is the increase in prices of goods and services over time.


What is the difference between recession and depression?

The difference between the depression and a recession is a recession is the down on an up and down rollercoaster. While the depression, there was no way to tell when it would end.


What is the difference between a recession and depression?

a depression is a particularly deep recession with high levels of unemployment


What is the difference between recession and inflation?

Recession is a period of economic decline characterized by a decrease in economic activity, while inflation is a general increase in prices of goods and services.


What is relationship between inflation and recession?

The relationship between inflation and recession is that a recession will cause inflation to go down. The reason for this is due to their being less money being spent due to the recession.


What is difference between depression and a recession?

A recession is a low point in the economy. A depression is an extreme low point in the economy that lasts a long period of time. We are at a recession, in the 1930's their was a depression in the US.


What is the difference between depression and recession?

Depression and recession are both economic downturns, but a depression is more severe and longer-lasting than a recession. A depression involves a significant decline in economic activity, high unemployment rates, and widespread hardship, while a recession is a period of economic decline that is less severe and shorter in duration.


Can you define the difference between a recession and a depression?

A recession is a period of economic decline that lasts for a few months, while a depression is a more severe and prolonged economic downturn that can last for years.


What is the difference between a reccession and a depression?

Recession refers to a temporary economic decline whereas a depression is a period of prolonged downturn in economic activity


How does the relationship between inflation and recession impact the overall economy?

The relationship between inflation and recession can impact the overall economy in a significant way. When inflation is high, it can lead to a decrease in consumer purchasing power and a rise in production costs, which can slow down economic growth and potentially lead to a recession. On the other hand, during a recession, inflation may decrease as demand for goods and services falls, which can help stimulate economic recovery. Overall, finding a balance between inflation and recession is crucial for maintaining a stable and healthy economy.


What's the difference between a recession and inflation?

A recession is a period of economic decline marked by a decrease in economic activity, such as a drop in GDP and rising unemployment. Inflation, on the other hand, is the general increase in prices of goods and services over time, leading to a decrease in the purchasing power of money.


What is the difference between recession and prosperity?

They are complete opposites. Recession means growth rate is up, employment is down, and inflation is in the making. Prosperity, is the result of economic growth. Wealth is strong, a sort of reconstruction of the government's finale.