Recession is a downturn in economic activity that can last from a few months to several years. It’s one of the four phases in the business cycle, from growth to peak to recession to trough (and back again).
Generally, experts agree that when GDP (a measure of all the goods and services produced by an economy) declines for two consecutive quarters, it is a good indicator of a downturn. However, there are many other signs of a downturn, including a drop in stock prices, reduced consumer spending, falling home values, and declining small business startups.
The cause of a recession can be quite varied, from financial crises like the housing bubble or dot com bubble, to global economic shocks such as the COVID disruption. It can also be caused by things like political unrest, or environmental issues such as a drought.
It’s also important to remember that a recession isn’t just an inconvenience for the economy, it has real impacts on people’s lives too. For example, unemployment rates increase during a recession, which can lead to less money being available for other goods and services. That can lead to increased food costs or fewer trips out and a reduction in overall quality of life. It also puts pressure on businesses to act responsibly, with many reducing staff or cutting salaries. This can have negative social and ethical implications.
About the Author
