Recession Definition
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Recession Definition

A recession is defined in many different ways. Economists provide varied views and opinions on this subject. It is defined based on the diverse factors and variables that cause it, like employment, sales, income and more. Recessions are very common nowadays, especially in the United States. The US economy is weakening and a lot of countries are affected by it.

Recession Definition / A Declining Economy

According to investopedia.com, it is “a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.”

A recession is generally a downturn in an economy which is a normal part of the business cycle that lasts for a few months to more than a year and is indicated by a decrease or the negative growth of a country’s GDP in a period of at least two consecutive quarters. It has other indicators like unemployment rate, stock market returns, inflation rate and more.

Recession Definition / How long does it last?

A recession usually lasts for about six to eighteen months. However, recovery period from recessions vary and depends on the reasons that caused it. Some upturns from recession take longer time while some just take a few months

Recession Definition / What are the causes?

According to recession.org, “An economic recession is primarily attributed to the actions taken to control the money supply in an economy. The Federal Reserve is the agency responsible for maintaining the delicate balance between money supply, interest rates, and inflation. When this delicate balance is tipped, the economy is forced to correct itself.”

Oil prices and wars are some factors that are also said to cause the economic recession because these have an effect on the growth of a country’s economy. A recession caused by these issues tend to have faster recovery compared to other recessions.

Recession Definition / Why do we have recessions?

Recessions are said to be a usual part of the business cycle. It is an unavoidable circumstance that each business or economy has to undergo at some point in time. Businesses could learn different lessons from recessions like the importance of saving, good decision-making and establishing ways of making their company a stronger one.

Recession Definition / Is a recession good for the economy and the people?

Recessions pose a threat to both companies or businesses and their employees. Some people consider recessions good for the economy. But these economic downturns mainly affect smaller companies and individuals.

Smaller companies tend to close down during a recession and the stronger one can thrive. Lots of people lose their jobs when these weaker companies close down thus affecting the lives of many individuals and families. The domino effect is deeply felt. Unemployment leads to loss of household income which results to families having nothing to spend in buying their needs and necessities.


For more information about proactive things you can do during a recession use the following links:

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