Glossary Terms


Reviewed by Minh Tong
Updated March 3, 2023

A recession is a period of economic decline measured by a decrease in the Gross Domestic Product (GDP) for two or more consecutive quarters. 

During a recession, businesses often experience losses due to decreased consumer spending. Unemployment may also increase as companies reduce their workforce and lay off employees. 

A prolonged recession can lead to reduced government revenue, increased debt levels, and decreased investment from foreign investors. As such, it is important for policymakers to take steps to address recessions in order to ensure that the economy remains stable over time.

In addition to its negative effects on individuals and businesses, recessions have far-reaching implications for society at large. They can cause long-term damage to an economy if not addressed promptly and appropriately. 

For example, a recession can lead to reduced government spending on social programs, increased poverty levels, and decreased public confidence in the economy. 

Furthermore, if not managed carefully, a recession can have long-term effects on national economies.

Recessions are often preceded by warning signs such as rising unemployment and decreasing consumer confidence. 

Governments should take measures to address recessions before they become severe or prolonged. This may include providing economic stimulus to businesses and households, increasing fiscal spending, and implementing policies that encourage private investment. 

It is also important for governments to ensure that their policies are well-timed and effective in order to minimize their impact on the overall economy.  By taking appropriate steps during a recession, governments can help reduce its duration and severity and ensure that the economy remains stable in the long term.

Ultimately, recessions are an unavoidable part of a nation’s economic cycle. However, by understanding their causes and effects, governments, businesses, and individuals can take measures to address them effectively. 

By taking appropriate steps, governments can help ensure that recessions do not have a lasting impact on the economy or on individual households. In this way, they can help promote stability and growth for all citizens in the long run.