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Monday, August 30, 2010

Recovery or Expansion?

Today I got confused about these terms so I did some research and I have a tentative resolution.

When you talk about recovery you are talking about one thing and when you talk about expansion you are talking about something else.

Recovery and expansion happen at the same time.

Whenever the economy is growing that is called expansion. But when there has just been a recession, as the economy begins to grow, it is called recovery until the economy reaches its previous peak.

Once the previous peak has been surpassed it is no longer called recovery, then it may be called prosperity or something else.

In nominal terms, the economy has already surpassed the previous peak, but when adjusted for inflation, there needs to be about another 2% of growth in order to be considered "recovered."

I am hoping that when all the numbers are in, 2010 will prove to have a larger GDP than any prior year, but it may be close.

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