Question

The second quarter of 2020 (i.e., the months of April, May, June) saw the deepest recession in the Canadian economy in terms of contraction in economic activity and employment. which recovery path for output and employment from the following set of possibilities is the economy likely to take over the next year or so: V-shaped, U-shaped, L-shaped, W-shaped, K-shaped Please pick only one and justify reasoning

Answer 1

Since we are facing a global recession followed by a global pandemic, L shaped recovery would the closest way to move forward for a realist.

An L-shaped recovery is the most harmful type of recession and recovery. Because there is a drastic drop in economic growth and the economy does not recover for a significant period of time, an L-shaped recession is often called a depression.

The most important feature that defines an L-shaped recovery is a failure of the economy to progress back toward full employment after a recession. Others point out that L-shaped recoveries can typically be characterized as those in which monetary and fiscal policy interventions actively prevent the economy from adjusting and recovering from the losses of the preceding recession.

L-Shaped Recovery Examples

Three major examples of L-shaped recoveries stand out in the last century of economic cycles: the recoveries of the Great Depression of the 1930’s, the Lost Decade in Japan, and the Great Recession following the 2008 financial crisis.