Is there such a thing as a ‘good’ or ‘bad’ recession?
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Demand shocks occur when the demand for products drops as people stop earning money. A tactic to fix this is to stimulate the economy. In 2008, Australia gave households cash and encouraged them to spend to jumpstart the economy.
In 2020, the problem is also a lack of goods because businesses stopped working. If you give people more money, businesses will increase their prices, which will lead to a rise in inflation.
Supply shocks occur when people still have money to spend but cannot do so because shops are closed, or prices have shot up.
The 2020 crisis is a mix of supply and demand shocks, brought on by furloughing and temporarily preventing work in specific sectors. This makes it harder to predict how government interventions will work based on other recessions.
Now is a good time to fix parts of the economy we don't like as part of the recovery.
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