What Is a Double-Dip Recession
Normally recession is known as the shrinking the gross domestic product of an economy. It can be clearly understood as when the gross domestic product slides to negative after two quarters of positive increase is referred to as double dip recession. It is a slide that happens after a short recovery which is followed by one more recession.
The cause for such kind of scenario is mainly slowdown for the demand of goods and services because of unemployment. The economists are of the view that the consumers are mainly responsible for any kind of recession. A warning sign of double dip recession is the stagnation in the assurance of end users. It denotes the contraction of business cycle where production is affected due to slowdown in all sectors of the economy.
There are certain signs that allow us to know that the economy is in for a sure recession:
Inflation: when there is a price rise it is a sure sign of loss of confidence in consumers. It also denotes the sign of recession setting in. For example petrol prices have been increasing very often which shows the inflation is high.
Investments Yield Loss: any kind of investment made by individual is yielding loss indicates recession in economy. For example the recent world stock market slowdown, which affected the whole world economy causing share, prices to fall below the market price.
Credit Crunch: this happens when the banks that have lent money don’t get them back on time. The borrowers might have done this directly or indirectly causing money shortage in the economy. This in turn kick starts recession slowly.
Malinvestment: the main cause of double dip recession is Malinvestment where people would have invested in unproductive investments. By investing in these things huge amount of money is blocked their by causing money crisis.
Oil Prices: the main sign that double dip recession is setting is that the prices of oil drops as the economy moves towards slowdown. Because of this the other sectors like airlines and petrochemical industry suffers a lot, bringing them to the brink of heavy losses.
Government Budget Deficit: this is very evident in recent times, a deficit in central budget in a clear sign that double dip recession is almost there. The deficit budget calls for harsh sternness like job cuts, increase in prices of essential commodities etc.
Unemployment: this may create two major problems, one people without job will cut down their expenses which leads to less money inflow and second is government needs money to prevent this unemployment from becoming a grave situation in the country.
Double dip recession is worse than the first one because there is always a fear that the economy would go into a much longer period of recession making recovery very difficult. This kind of recession affects not only the economy of a country but also its citizens and their morale.