Inflation vs. Recession: What’s the Difference?
The main difference between inflation and recession is that inflation refers to a sustained increase in the general price level of goods and services while recession is characterized by a significant decline in economic activity, typically marked by a decrease in GDP for two consecutive quarters.
Before we move to more differences, let’s first understand Inflation and Recession:
- Inflation: Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time.
- Recession: A recession is a significant and widespread decline in economic activity, typically characterized by a contraction in GDP for two consecutive quarters.
Now, let’s get to Inflation vs Recession:
Major differences between Inflation and Recession
| Inflation | Recession |
|---|---|
| Inflation may have mixed effects on employment, as it can stimulate economic growth and create jobs in some sectors. | A recession is characterized by high unemployment rates and job losses. |
| Inflation can coexist with economic growth, but at higher levels, it can hinder long-term growth potential. | A recession represents a contraction in economic activity and a decline in GDP. |
| Inflation can be caused by factors such as excessive money supply, increased production costs, or strong consumer demand. | A recession is typically triggered by a significant decline in aggregate demand, financial crises, or external shocks. |
| Inflation is a continuous process that occurs over an extended period. | A recession is a specific period of economic contraction that typically lasts for several quarters or more. |
| Inflation leads to a general increase in prices, reducing the purchasing power of money. | A recession may lead to lower prices as demand decreases. |
So, these are the main differences between the entities.
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