A recession refers to a significant economic decline or contraction experienced by a country or a global economy, characterized by a significant decline in various economic indicators such as gross domestic product (GDP), employment rates, consumer spending, investment, and overall economic activity. It is typically characterized by a sustained period of negative economic growth, generally lasting for more than a few months, resulting in a decline in overall economic output and an increase in unemployment rates.
During a recession, businesses may experience reduced profits and financial instability, leading to layoffs, closure of enterprises, and reduced investment in new projects. Consumers tend to cut back on spending due to economic uncertainty, leading to a decrease in demand for goods and services. This decline in consumption further exacerbates the economic decline, creating a downward spiral.
Recessions are often caused by a variety of factors, including a decline in business investments, a decrease in consumer spending, financial crises, policy changes, or global economic shifts. Governments and central banks typically respond to recessions by implementing fiscal and monetary measures to stimulate the economy, such as reducing interest rates, increasing government spending, providing stimulus packages, or implementing market regulations.
Recessions are considered a normal and cyclical part of the economic cycle, with periods of expansion and contraction. However, severe and prolonged recessions can have significant social and economic consequences, including increased poverty rates, reduced opportunities for employment, and long-term negative impacts on economic growth.
