EconExtra will be a series of posts that go beyond the textbook, relating current events and recent developments in economics to content standards, and providing resource suggestions to help you incorporate the current events into your lessons.

Issue/Event

Recessions happen for a wide variety of reasons. There is variation expected in the course of business cycles*, but not all countries experience them regularly. It took the current global Covid-19 Pandemic to break Australia’s 28 year growth run. Big recessions are triggered by either an external force, like an oil shortage or the pandemic that has caused the one we are currently experiencing, or by the accumulation of pressure from something systemic in the financial system, like asset bubbles bursting.

The recoveries from each one follow a path that is shaped in part by the type and severity of the bust, as well as the fiscal and monetary policy enacted to address the situation. They are often described using the letter of the alphabet that most closely resembles the graph of the recovery, like U, V, W (double-dip), and L. The newest entrant to this group is the “K-shaped” recovery, which is how economists are talking about the U.S. recovery from the pandemic.

The suggestions in this post incorporate CEE Content Standards 8--Unemployment, Content Standard 10--Monetary Policy and Content Standard 11-Fiscal Policy.

Step # 1: A video introduction

TD Ameritrade posts videos for its investors, and this one posed in June does a good job of explaining the letter shapes used to describe the recoveries, and gives examples of each. 

Step #2: A little research

1. a) Learn what a K-shaped recovery would look like. This Fast Company article does a good job of explaining it, and comparing it to other types or recoveries.

1. b) Learn about a past recession. Students could find a recession from the last 100 years that they find interesting. This CNBC article provides a good overview of the major recessions of modern times. (Students may need to do a bit more research to complete the assignment below.)

Step #3: Assignment Idea

Compare and contrast a historic recession and recovery to what the student forecasts the recovery from the Covid-19 Pandemic will look like. Include the following attributes:

• Cause
• Severity (GDP and unemployment)

Resource for this: the Minneapolis Fed has great interactive charts comparing both measures across 11 recent recessions.

• Monetary Policy used to address the recession
• Fiscal Policy enacted to address the recession, including anything else the student thinks should be done to help today.
• Other factors that may have influenced or may influence the recovery

*If you are looking for something on Business Cycles explained simply, try the Khan Academy AP Economics review on the topic.

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