Key Differences Between Recession and Stagflation

1. What They Are:

   • Recession: This is a time when the economy gets worse. It is marked by two quarters (or six months) where the country's economy shrinks.
   • Stagflation: This is when prices are going up (inflation) and more people are losing their jobs (unemployment) at the same time. Meanwhile, the economy is not growing at all.

2. Signs to Look For:

   • Recession:
     • The economy is shrinking, with an average drop of about 2.5%.
     • The unemployment rate could go up to around 10%.
   • Stagflation:
     • Prices are rising, with an average inflation rate of about 6%.
     • Unemployment might climb to 8%, and the economy shows no growth (0%).

3. What Can Be Done:

   • Recession: The government might step in to help by encouraging people to spend and invest more money.
   • Stagflation: The government may try to tighten money policies to control inflation, but this can lead to even more job losses.