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Daily Banking Terminology

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Difference Between Recession & Credit Crunch

=> Introduction
▪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.

=> Recession
▪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.

=> Credit Crunch:
▪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.

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