Recession

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== Recession ==

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP).

Causes

Recessions can be triggered by various factors, including:

• A sudden economic shock, such as a financial crisis or natural disaster.
• Excessive debt accumulation leading to a debt crisis.
• High inflation rates causing a reduction in purchasing power.
• Significant drops in consumer and business confidence.
• Tightening of monetary policy by central banks to control inflation.

Effects

The effects of a recession can be widespread and severe, including:

• Increased unemployment rates as businesses cut back on production and lay off workers.
• Decreased consumer spending and business investment.
• Lower levels of industrial production.
• Declines in stock market values.
• Increased government debt due to higher spending on social welfare programs and lower tax revenues.

Historical Examples

Some notable historical examples of recessions include:

• The Great Depression of the 1930s.
• The 1973 oil crisis leading to a global recession.
• The Great Recession of 2007-2009, triggered by the subprime mortgage crisis.

Government Response

Governments and central banks often respond to recessions with various measures, such as:

• Implementing fiscal policy measures like increased government spending and tax cuts to stimulate the economy.
• Adjusting monetary policy by lowering interest rates to encourage borrowing and investment.
• Providing bailouts to key industries or financial institutions to prevent further economic decline.

See Also

• Economic depression
• Business cycle
• Economic growth
• Inflation
• Deflation
• Stagflation
• Monetary policy
• Fiscal policy