What is a recession?

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wordprof's profile pic

wordprof | College Teacher | (Level 1) Educator Emeritus

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Economists taxonomize the stages of a lively economy by assessing, among other factors such as wages and national debt, the ratio of GNP (gross domestic product) to buying activity.  As the ratio decreases, the term "recession" is used, to mean "a receding from growth."  Since the ideal if abstractly impossible desired movement is growth, recession is seen as negative, just as a child's academic failure to proceed to the next class is seen as a worrisome sign.  

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The most typical definition for a recession, found in most economics textbooks, is that a recession exists whenever a country’s economy sees its real gross domestic product (GDP) decline for two or more consecutive quarters (6 months or more in a row).  However, this is not the only definition for a recession.

In general, a recession is a time when a country’s economy is declining.  The country generally starts to produce fewer goods and services.  This is why GDP goes down.  Because the country is producing fewer things, there is more unemployment.  People get laid off because they are not needed to make goods and services. 

Recessions are typically seen as a natural part of the business cycle in a capitalist economy.  Economies never simply grow uninterruptedly.  Instead, they rise and fall.  A recession occurs when the economy is falling.

When a very bad recession occurs, it is often referred to as a depression.  There is no objective criterion to differentiate between a recession and a depression.  Instead, we generally just say that a depression is a really bad recession, but “really bad” is not something that has an exact definition.

So, a recession is really just a time when the economy is in decline, but there are different ways to define exactly when this is happening.  Follow the link below for more.

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ncchemist | eNotes Employee

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In economic terms, a recession is technically defined by many economists as two consecutive quarters (or six months) with negative GDP growth.  The term GDP stands for gross domestic product and is a complex measure of the total amount of production in a given economy, usually a nation.  It is basically a measure of the immediate economic health of a nation.  So a negative change in GDP is equal to a contraction in economic activity, and if this contraction persists for six months then the economy is in a recession.  If the drop in GDP is severe enough or even longer lasting than normal, the economy is said to be in a depression.  Recessionary dips in the business cycle are usually accompanied by an increase in the unemployment rate.  The federal government usually responds to a recession by lowering interest rates and increasing government spending to try to increase the money supply and stimulate greater economic activity.

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mlsldy3 | Elementary School Teacher | (Level 2) Educator

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In economics, a recession is a business cycle contraction. It is a general slowdown in economic activity. Investment spending, household income, business profits and inflation fall. In the meantime bankruptcies and the unemployment rate rises. There is widespread drop is spending. 

 A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP or Macroeconomics, in two successive quarters.

kipling2448's profile pic

kipling2448 | (Level 3) Educator Emeritus

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 A recession is typically defined as two or more quarters in a row characterized by contractions in economic indicators and activity.  The economy has not only not grown for two quarters in a row; it has, conversely, experienced negative growth in terms of Gross Domestic Product.  Unemployment rates generally increase with the drop in economic activity, and the Federal Reserve Board will often lower interest rates in an effort at stimulating activity.  Lowering interest rates increases the incentive on the part of businesses to borrow for the purpose of expanding its activities, often expressed through the recapitalization of manufacturing facilities, expansion of existing business lines, or extension into new business activities.  Recessions are typically considered to extend from two to 18 months, beyond which economists categorize the state of an economy as being in a depression.

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krishna-agrawala | College Teacher | (Level 3) Valedictorian

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Recession is a decline in overall economic activity of a country or an economy for an extended period – say six months or more. During recession there is a drop in buying, selling, and production, and a rise in unemployment. Recession is generally accompanied by fall in prices. However, during some recession prices may continue to rise. Such recessions are sometimes called stagflation. Recessions are part of the business cycle, a recurring rise and fall in economic activity. A severe recession with substantial fall in economic activity, and lasting for longer period is called a depression.

Most recessions occur because drop in total spending in the economy. Such drop in spending may be triggered in many different ways such as cut in Government spending, tight money policy, and peoples’ pessimistic expectations about economy’s future. A widespread panic may develop among general public due to conditions such as sudden and steep fall in stock market and share prices, which can ultimately lead to recession. Currently, almost the entire world is experiencing a recession. This recession was triggered by fear of economic failure of major financial institutions.

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sid-sarfraz | Student, Graduate | (Level 2) Salutatorian

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Recession means reversal. In a country when the economic growth declines that can be seen in business productivity and profits, household income, investment spending etc., is referred to as recession. Basically it is the slow down of any country's economic activity which is continued for two consecutive quarters, then it is said that recession has occurred.

lvrrivl's profile pic

lvrrivl | Student, Grade 9 | (Level 1) eNoter

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A recession is the act of receding or withdrawing. Which means reversal of action or reduction of business activity.

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ssarfraz | Student, Professional | (Level 2) Honors

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A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

In economics, a recession is a business cycle contraction. It is a general slowdown in economic activity. Macroeconomic indicators such as GDP (gross domestic product), investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.


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