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Double-Dip Recession

Written By
Paul Tracy
Updated January 16, 2021

What is a Double-Dip Recession?

A double-dip recession occurs when the economy experiences a recession followed by a brief recovery and then another period of recession.

How Does a Double-Dip Recession Work?

Recessions occur when the gross domestic product (GDP) declines for two consecutive quarters.

In the case of a double-dip recession, also known as a W-shaped recession, the downturn is followed by a period of recovery and then another extended downturn.

In many cases, the second downturn may be caused in part by job layoffs and spending cutbacks from the previous recession, leading to downturns in the demand for goods and services.

Why Does a Double-Dip Recession Matter?

Double-dip recessions are particularly troublesome because they signal a lack of confidence from consumers and businesses in the economy's ability to recover from the previous recession. Additionally, recovery from the second dip may take longer.

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