Definition
A recession generally involves falling production, employment, income, and spending across much of the economy for more than a brief period.
Political Dictionary
Recession
A recession is a significant, broad decline in economic activity.
Why It Matters
Recessions can reduce jobs, tax revenue, investment, and household financial security.
How It Works
Economists evaluate indicators such as real GDP, employment, industrial production, and income to determine whether a recession is occurring.
History
Business cycles have produced repeated recessions throughout modern economic history.
Example
A recession may begin after a financial crisis, sharp interest-rate increase, or major external shock.
Common Misconceptions
- Two negative GDP quarters are the only possible definition.
- Every recession is equally severe.
- Stock-market declines always mean a recession has begun.
Related Terms
- Fiscal Policy
- Monetary Policy
- Inflation
- Economic Growth
- Government Spending
Related Topics
See Also