Recession: A Comprehensive Definition

Understanding the Term

In economics, a recession is a widespread and persistent decline in economic activity, characterized by a prolonged period of negative growth. It is a contractionary phase of the business cycle, where industrial production, business activity, and consumer spending all experience a downturn.

Measuring a Recession

Economists typically define a recession as a decline in real GDP (gross domestic product) for two consecutive quarters. Real GDP measures the value of all goods and services produced in a country, adjusted for inflation. A sustained decline in real GDP indicates that the economy is producing less, leading to job losses and slower growth.

Causes of Recessions

Recessions can be caused by a variety of factors, such as:

• Financial crises and economic shocks
• Decrease in consumer spending
• Slowdown in business investment
• External economic factors, such as a decline in global demand