Recession Essential terms you should know.

Recession A Term You Need to Know

A recession is a period of economic decline characterized by a fall in gross domestic product (GDP), a decline in employment, and a reduction in trade and industrial activity. It is a common feature of modern capitalist economies, and is usually considered to last for at least two consecutive quarters (six months).

Recessions can be caused by a variety of factors, including a drop in consumer and business confidence, a decline in investment spending, a tightening of monetary policy, and a reduction in government spending. They can also be triggered by external factors, such as a sharp decline in the price of a major export commodity, a sudden increase in interest rates, or a financial crisis.

During a recession, unemployment typically rises as businesses lay off workers and reduce their workforce. Consumer spending and investment spending also decline, leading to a reduction in demand for goods and services. This, in turn, can lead to lower levels of economic activity, declining prices, and lower economic growth.

Recessions can have a profound impact on people’s lives, causing job losses, lower wages, and reduced living standards. They can also lead to increased government debt and reduced public services, as governments are forced to spend more to support their citizens during periods of economic hardship.

The impact of a recession on an economy can be mitigated by government policies aimed at boosting consumer and business confidence, supporting employment, and stimulating economic growth. These may include fiscal stimulus measures, such as increased government spending, tax cuts, or subsidies, as well as monetary policy measures, such as lower interest rates, increased lending, and increased money supply.

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