Definition of recession

Government and the Macroeconomy – Economic Growth

Definition of a Recession

A recession is a period of economic decline that lasts for at least two consecutive quarters. During a recession, the economy produces less $GDP$, people lose jobs, and businesses earn lower profits. 📉

Think of the economy like a car engine. If the engine runs slower and slower, the car stops moving. That’s a recession.

• Two or more consecutive quarters of negative growth in $GDP$.
• Rising unemployment rates.
• Declining consumer spending.
• Reduced industrial production.

Imagine a school where the number of students (GDP) drops each year, teachers (businesses) get fewer students, and many students leave school (unemployment). That’s like a recession.

1. A recession lasts at least two quarters.
2. It involves negative GDP growth and higher unemployment.
3. It is a normal part of the business cycle.
4. Governments often intervene with stimulus measures.