Introduction
The economy goes through ups and downs, which are parts of the business cycle. A recession happens when the economy gets significantly weaker and stays that way for six months. This means things like:
- People are spending less money
- Businesses might slow down or even close
- Many people might lose their jobs
Recession is a natural part of the business cycle, but it can be difficult for many people. After a Covid-related downturn, the US economy has mostly been in a recovery and growth phase, but this can change quickly based on conditions in the country.
A4SC Resources
The below resources include relevant videos and lesson plans from our content library that will help contextualize this current event within broader, more enduring, concepts.
The Role of the Federal Reserve – The Federal Reserve (the Fed) is the central bank of the United States, acting as the nation’s financial manager. It influences the economy, including recessions, to stabilize the financial system.
The Federal Reserve and Interest Rates – The Fed adjusts interest rates to influence the cost of borrowing money for banks. This influences borrowing costs for businesses and consumers, to either stimulate economic growth during a recession or slow down an economy that is growing too fast.
The Federal Reserve and Monetary Policy – Monetary policy is the way central banks manage the country’s money supply and interest rates, using tools like lowering interest rates to encourage borrowing and spending, which can help stimulate economic activity during a recession and keep the economy stable.
Broken Window Fallacy – When the economy is running poorly, sometimes people suggest that money spent to fix the problem is a benefit to the overall economy. The Broken Window fallacy reminds us that it doesn’t actually make the economy richer overall. It’s a key idea during recessions because it helps us see that simply replacing what was lost doesn’t improve the
Discussion Questions
- Why is it so difficult for governments to combat recessions?
- What challenges do job seekers face during recessions and how can they prepare?
- Why isn’t just handing out money the best solution to economic decline?
Activity
When a recession hits, businesses often have to make tough decisions. In small groups, put yourselves in the shoes of a local business owner. What practical steps might you take to try and keep your business afloat during a recession? Consider strategies related to staffing, pricing, marketing, and managing expenses. What could you do with each of those to improve your business? What would be the effects of raising and lowering each of those? (For example, what would happen if you reduce staff? What if you were to add staff?)
Additional Resources
- Slidebean. (2023, February). How History Helps Understand Future Recessions. Medium. https://slidebean.medium.com/how-history-helps-understand-future-recessions-3c7f0be119f9
- Weinberg, J. (2013, November 22). The Great Recession and Its Aftermath. Federal Reserve History; Federal Reserve History. https://www.federalreservehistory.org/essays/great-recession-and-its-aftermath
- Wolla, S. A. (2023, March 1). All About the Business Cycle: Where Do Recessions Come From? stlouisfed.org; Federal Reserve Bank of St. Louis. https://www.stlouisfed.org/publications/page-one-economics/2023/03/01/all-about-the-business-cycle-where-do-recessions-come-from
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