Skip to main content

What causes an economic recession? - Richard Coffin


23,373 Questions Answered

TEDEd Animation

Let’s Begin…

For millennia, the people of Britain had been using bronze to make tools and jewelry, and as a currency for trade. But around 800 BCE, that began to change: the value of bronze declined, causing social upheaval and an economic crisis— what we would call a recession today. So what causes recessions? Richard Coffin digs into the economic fluctuations that affect our modern markets.

Additional Resources for you to Explore

The actual definition of a recession varies among institutions. In the United States, the definition is broad, with the National Bureau of Economic Research defining them as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” In the United Kingdom, however, the definition focuses solely on gross domestic product (GDP), or the total volume of goods and services produced within a country, with the HM Treasury defining recessions as “two or more consecutive quarters (a period of three months) of contraction in national GDP.” Despite the nuance, many recessions meet both criteria.

One of the most well-known examples of a recession is the Great Recession, which began in 2008 with a real estate crisis in the United States. The downturn quickly expanded, impacting countries around the globe. Watch this video for a quick 5 minute history lesson on the Great Recession.

Many economists believe that recessions are an inevitable occurrence; this is because of something known as the business cycle, a model that suggests economies continually cycle through periods of expansion and contraction. Visit this website to learn more about the business cycle.

Despite their potential inevitability, we do seem to be getting better at handling recessions. In the United States, the average duration of a contraction has fallen since 1854, while the length of expansions has grown. Visit this website to learn more about the timing and duration of past U.S. recessions.

Countries have also been breaking records for the length of their expansions (periods of growth that occur in the absence of a recession). Australia, for example, hasn’t experienced a recession for 27 years. Watch this video to learn more about how Australia has avoided a recession for so long.

Next Section »

About TED-Ed Animations

TED-Ed Animations feature the words and ideas of educators brought to life by professional animators. Are you an educator or animator interested in creating a TED-Ed Animation? Nominate yourself here »

Meet The Creators

  • Educator Richard M. Coffin
  • Director Nabil Burias
  • Narrator Addison Anderson
  • Animator Nabil Burias
  • Producer Aaron Augenblick
  • Music GDM Production Music
  • Director of Production Gerta Xhelo
  • Editorial Producer Alex Rosenthal
  • Associate Producer Bethany Cutmore-Scott
  • Associate Editorial Producer Elizabeth Cox
  • Fact-Checker Eden Girma

More from Government: Declassified