Recession
Recession
Recession (/rɪˈsɛʃən/; from Latin recessio, "a going back") is a significant decline in economic activity that lasts more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
Etymology
The term "recession" has its origins in the Latin word recessio, which means "a going back". It was first used in the economic context in the 19th century to describe a temporary period of economic decline.
Definition
A recession is typically defined as a decline in Gross Domestic Product (GDP) for two or more consecutive quarters. However, this definition is not universally accepted, and some economists prefer to define a recession as a significant decline in economic activity spread across the economy, lasting more than a few months.
Causes of Recession
Recessions can be caused by a variety of factors, including:
- Inflation: High inflation can lead to a recession as it erodes purchasing power and can lead to decreased spending.
- Financial crisis: A financial crisis can lead to a recession as it can cause a decrease in investment and consumption.
- Government policies: Government policies, such as changes in tax policy or regulatory policy, can also lead to a recession.
Effects of Recession
The effects of a recession can be widespread and can include:
- Unemployment: During a recession, companies often lay off employees, leading to an increase in unemployment.
- Deflation: A recession can lead to deflation, which is a decrease in the general price level of goods and services.
- Economic stagnation: A recession can lead to economic stagnation, which is a prolonged period of little or no growth in the economy.
Related Terms
- Depression: A depression is a severe and prolonged downturn in economic activity. It is more severe than a recession.
- Economic cycle: The economic cycle is the natural fluctuation of the economy between periods of expansion (growth) and contraction (recession).
- Stagflation: Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.
External links
- Medical encyclopedia article on Recession
- Wikipedia's article - Recession
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