Different types of Economic Recoveries

  • September 1, 2021
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
No Comments

 

 

Different types of Economic Recoveries

Subject – Economy

Context – The government said the NSO numbers reaffirmed its prediction of an “imminent V-­shaped recovery”.

Concept –

Economic recovery can take many forms, which is depicted using alphabetic notations. For example, a Z-shaped recovery, V-shaped recovery, U-shaped recovery, elongated U-shaped recovery, W-shaped recovery, L-shaped recovery and K-shaped recovery.

K-Shaped Recovery:

  • A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes.
  • This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
  • A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.

 

Z-shaped recovery:

  • It is the most-optimistic scenario in which the economy quickly rises after an economic crash.
  • In this economic disruption lasts for a small period wherein more than people’s incomes, it is their ability to spend is restricted.

V-shaped recovery:

  • It is the next-best scenario after Z-shaped recovery in which the economy quickly recoups lost ground and gets back to the normal growth trend-line.
  • In this, incomes and jobs are not permanently lost, and the economic growth recovers sharply and returns to the path it was following before the disruption.

U-shaped recovery: It is a scenario in which the economy, after falling, struggles around a low growth rate for some time, before rising gradually to usual levels.

  • In this case several jobs are lost and people fall upon their savings.
  • If this process is more-long drawn than it throws up the “elongated U” shape.

 

W-shaped recovery: A W-shaped recovery is a dangerous creature. In this, growth falls and rises, but falls again before recovering, thus forming a W-like chart.

  • The double-dip depicted by a W-shaped recovery can be due to the second wave of the pandemic.

L-shaped recovery: In this, the economy fails to regain the level of GDP even after years go by.

  • The shape shows that there is a permanent loss to the economy’s ability to produce.

Different types of Economic Recoveries economy