What is a recession?

A recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced. This typically occurs when there is a significant drop in consumer spending and investment, leading to a decrease in overall economic activity. During a recession, unemployment rates often increase, businesses may see reduced revenue, and overall economic output contracts.

Understanding recessions is crucial as they can impact various aspects of the economy, including employment, consumer confidence, and government policy responses. The identification of a recession is often based on specific economic indicators, such as two consecutive quarters of negative GDP growth, and is closely monitored by economists and policymakers. Recognizing the characteristics and implications of a recession helps individuals and businesses make informed financial decisions.