V Shaped Recovery - Explained
What is a V-Shaped Recovery?
Written by Jason Gordon
Updated at March 28th, 2023
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What is a V-Shaped Recovery?
A V-shaped recovery is a term that describes a period of economic decline (recession) and recovery that resembles a V shape. This V shape symbolizes a short trough or decline in an economy, followed by rapid recovery, the first stroke of the V shape shows a sharp but short decline while the other stroke indicates a rapid recovery. There are different shapes used by economists to describe different types of recessions and recoveries in an economy such as L-shaped, W-shaped, U-shaped, and J-shaped recovery. In the case of a V-shaped recovery, an economy suffers a sharp decline for a short period and then a sharp rise to its previous status.
Back to:ECONOMIC ANALYSIS & MONETARY POLICY
How does a V-Shaped Recovery Work?
Different types of economic recovery exist and each recovery is a measure of how healthy an economy is. The V-shaped recovery is otherwise called the V-shaped recession. It is an economic chart that depicts a drastic decline in an economy leading to a short period of recession which is later overthrown by a sharp economic recovery. Economists developed the V-shaped recovery chart and other charts after evaluating the overall health of an economy considering growth signals such as industrial output, gross domestic product, employment level, and other factors. In the United States, the 1953 recession is an instance of a V-shaped recovery in which the economy recovered from recession through the activities of consumers such as demand and spending.
V-Shaped Recovery Compared to an L-Shaped Recovery
V-Shaped recovery is characterized by a sudden economic decline followed by rapid economic growth. The case is different with L-shaped which is characterized by a sharp economic decline then a slow pace of recovery in an economy. There are many factors that contribute to a decline (recession) in an economy which includes monetary policies. The L-Shaped Recovery or recession is often described as the most dramatic recession given that there is slow economic growth or recovery after a steep recessionary period. Generally, countries of the world experience recessions and recoveries at different points and the duration with which the recession lasts before a recovery takes place determines the shape of the recovery.
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