Inflation and Recession

Inflation is the overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. As the cost of goods and services increase, the value of a dollar is going to fall because a person won't be able to purchase as much with that dollar. The Federal Reserve tries to have a steady inflation rate of between two and three percent annually in order to prevent hoarding of dollars because, it is argued, currency hoarding can lead to an economic slowdown.

Recession is a decline in gross domestic product (GDP) for two or more successive quarters of a year. In the US, The National Bureau of Economic Research has a more general framework for judging recessions:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale and retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.

 A severe or long recession is referred to as an economic depression. Although the distinction between a recession and a depression is not clearly defined, it is often said that a decline in GDP of more than 10% constitutes a depression.

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