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Recession

A recession is a significant decline in economic activity across the economy, lasting for an extended period, typically defined as two consecutive quarters of negative GDP growth. Recessions are characterized by reduced consumer and business spending, rising unemployment, declining industrial production, and slowing corporate profits. Governments and central banks often respond to recessions with monetary and fiscal policy measures, such as lowering interest rates, increasing government spending, or offering tax incentives, to stimulate growth and prevent a prolonged economic downturn.

Example

The global economy experienced a recession during the COVID-19 pandemic as lockdowns, reduced consumer spending, and business closures led to a sharp decline in economic output.

Key points

• A significant decline in economic activity, often marked by two consecutive quarters of negative GDP growth.

• Characterized by rising unemployment, reduced consumer spending, and declining industrial production.

• Governments use monetary and fiscal policies to stimulate recovery during recessions.

Quick Answers to Curious Questions

Signs include declining GDP, rising unemployment, falling consumer and business spending, and lower industrial output.

They implement monetary policies like cutting interest rates and fiscal policies like increased government spending to stimulate economic activity.

Businesses may see reduced sales and profits, while consumers face job losses and decreased purchasing power, leading to lower overall demand in the economy.