A recession is a period of declining economic activity from "summary" of The Economics Book by DK
A recession is a period of declining economic activity. During a recession, there is a decrease in the overall economic output of a country, leading to a slowdown in growth and a rise in unemployment. This decline in economic activity is typically characterized by a decrease in consumer spending, investment, and business production. The causes of a recession can vary, but they are often linked to factors such as a decrease in consumer confidence, a decline in business investment, or external shocks such as financial crises or natural disasters. When these factors come together, they can create a downward spiral in the economy, leading to a recession. One of the key indicators of a recession is a contraction in the Gross Domestic Product (GDP) of a country. GDP measures the total value of all goods and services produced within a country's borders, and a decline in GDP over two consecutive quarters is often used to identify a recession. During a recession, businesses may cut back on production, leading to layoffs and rising unemployment rates. This, in turn, can further reduce consumer spending as people become more cautious about their finances. The combination of decreased production, lower consumer spending, and rising unemployment can create a negative feedback loop that deepens the recession. Governments and central banks often implement policies to try to mitigate the effects of a recession. These policies may include cutting interest rates, increasing government spending, or implementing stimulus measures to encourage economic growth. However, the effectiveness of these measures can vary depending on the severity of the recession and the underlying causes of the economic downturn.
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