A handy guide to what some of the credit crunch jargon actually means.
STOCK MARKET CRASH
A crash is usually considered to be when share prices fall by 10 per cent in a few days.
RECESSION
A recession happens when the Gross Domestic Product or GDP – the value of goods and services produced by a country – falls for two consecutive quarters.
DEPRESSION
There is no exact definition of a depression but it is generally regarded to be one when economic output is on a downturn for more than two years. LIQUIDITY
An economist’s term for ready money. If a company encounters liquidity difficulties it has basically run out of cash. This has been a recurring problem of the credit crunch. ` LEVERAGE
Basically means borrowing a large amount of money. People use leverage when they buy houses with a mortgage, by putting up just a five per cent or 10 per cent deposit down to buy the full house.
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