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November 26, 2007

Economic terms

We hear so many economic terms thrown around today to describe the economy, from slow growth to stagnation to recession and even depression; N.C. State University economist Dr. Mike Walden provides a short tutorial on the meaning of these economic terms. Listen

"Slow growth means that the economy is still growing, but it is growing at a very slow rate," says Walden, a North Carolina Cooperative Extension economist and professor of agricultural and resource economics. "Usually economists get worried when the rate falls below 2 percent, and many think that is where we are heading in the next 6 to 9 months. But the point is that the economy is still expanding, it is just expanding at a very slow pace.

"Stagnation means that the economy is growing at a slow rate, so you have the slow growth aspect, but also sometimes you have higher inflation going along with it. So you kind of have the worst of both worlds: slow growth but rapidly rising prices. We had a situation like that in late 1970s and 1980s," Walden adds.

"Recession means that the growth rate actually goes negative. For an official recession, the rule of thumb is you have to have that negative growth rate at least for 6 months. The last time we had an official recession in our country was in the early 2001 to late 2001 period.

"Depression is a very long and very deep recession. It's a period of time, usually over several years, in which the economy does not grow. Usually we have to say the economy declines by at least 10 percent. The only time we had an official depression in the past 100 years was in the 1930s. I think it is highly unlikely that we will ever meet the very strong conditions for a depression in the future, and of course, that is a very good thing."

Posted by Dave at November 26, 2007 08:00 AM