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Recession Lingo

All of this economic talk can be a downer, but you still need to understand the jargon. Here, a lesson for those who think a bailout involves a sinking ship.

Checkbook with punched-out holes Laurie Frankel

Bailout

Money given to a struggling business whose downfall could have dire consequences for the entire economy; repayment may not be expected. In October 2008, President Bush authorized a $700 billion plan, one of the biggest ever. Airlines received the last bailout, amounting to $15 billion, after the 2001 terrorist attacks crippled the industry.

 

Consumer Confidence

A gauge of how good the average consumer feels about current economic conditions and future prospects. The monthly Consumer Confidence Index, a highly subjective measure that comes from a survey of 5,000 U.S. households, is closely watched by investors. The index hit an all-time low in October 2008.

 

Deflation

A general decline in prices across the economy. This might sound like a good thing, but it has major consequences. When prices are falling, consumers actually spend less, as they wait for still lower prices or because the declining value of their assets makes them feel poorer. This decrease in spending in turn increases unemployment.

 

Depression

A severe, prolonged recession (see below) characterized by the decline or the failure of businesses or banks, high unemployment, falling wages, and general economic collapse. The last recognized depression in the United States was the Great Depression of the early 1930s, when gross domestic product fell by 30 percent and unemployment hit 25 percent.

 

Recession

A significant, broad decline in economic activity lasting more than a few months. According to the National Bureau of Economic Research, the U.S. economy has been in a recession since December 2007. This is the 11th recession since World War II and is predicted to be one of the longest. On average, recent recessions have lasted around 14 months.

 

Stimulus

A short-term government intervention to encourage spending and investing during a weak economic period. It might be a tax cut or rebate, a boost in unemployment benefits, or direct government spending on public projects, which increases employment. The most recent stimulus occurred in May 2008, when payments of $600 were given to qualified people by the U.S. government.
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