A recession is a significant decline in economic activity across the economy lasting more than a few months, typically visible in GDP, real income, employment, industrial production, and wholesale-retail sales. It is generally recognized as occurring when there are two consecutive quarters of negative GDP growth.
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Recessions are part of the business cycle and usually follow periods of economic expansion.
Indicators such as rising unemployment rates and declining consumer spending often signal an upcoming recession.
The National Bureau of Economic Research (NBER) is responsible for officially declaring recessions in the U.S.
Monetary policy changes by central banks, like altering interest rates, are common responses to combat recessions.
Recessions can lead to deflation or disinflation due to reduced demand for goods and services.
Review Questions
What is the technical definition of a recession?
What organization declares recessions in the United States?
Name two indicators that typically signal an upcoming recession.
Related terms
Gross Domestic Product (GDP): The total value of goods produced and services provided in a country during one year.
Business Cycle: The fluctuation in economic activity that an economy experiences over a period of time, including expansion and contraction phases.
Monetary Policy: Actions by central banks to influence a nation's money supply and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.