- These terms are used while referring to the macroeconomics.
- Both have a great effect on the economy because both these terms are used when the economic cycle become because of certainly unfavourable factors which affect the economy.
- Both have an adverse effect on the buyer and the seller's deal.
- When in a market, the growth of economy becomes negative or adverse by comparing it with GDP of that particular country this situation is called a recession.
- So a recession is a condition when the level of trading or industrial activity is reduced in the market for two consecutive quarters.
- If it falls continue for two consecutive quarters by comparing with a measurement of gross domestic product and if it fails it is called a recession or economic decline.
- A recession means a notable decline in the trading or and industrial activity in the economy.
- Recession can be seen in the employment, production activity, wages, trading activity.
- The recession is part of a business cycle and for short period.
- A credit crunch is also known as a Credit squeeze or credit crisis.
- A credit crunch is a condition in which there is an immediate decline in the availability of a loan or the credit.
- A situation in which suddenly the credit becomes difficult to get.
- Sometimes it can be done by reverse actions like by strict rules and regulations to avail the fund from the financial institutions like banks, NBFCs, and many other lenders.
- This can also be done by making the interest rate higher than the normal rate so it automatically leads to the reduction in the demand for the credit and vice-versa.
- This can be the authority of a particular economy to handle or manage the inflation.
- A credit crunch is affected by the irregularly and improper lending manners which end with a loss to the financial institutions.
- And it will increase the debt to the lender and badly affects the whole economy.
Recession vs Credit crunch
||Recession is a situation in which the trading activities slow down because of some factors.||A credit crunch is a condition in which a sudden decline occur in the availability of a loan or the credit.|
|Reason||In recession, the trading activities starts falling in the market due to some unfavourable factors.||Improper lending to the borrowers leads to the credit crunch.|
|Indictor||A recession is indicated by the growth domestic product.||Debt increased in the market due to defaulters to the financial institutions.|
|Effect on economy||A recession has short term effect on the economy which affects the production activity, wages, trading activities etc.||A credit crunch has more effect on the economy as compared to the recession which affects the borrowers.|
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