A recession is a business cycle contraction that occurs when there is an overall decline in economic activity.[1] Recessions usually occur when there is a widespread decline in spending (an adverse demand shock). This situation can be triggered by a variety of events, such as a financial crisis, foreign trade shock, negative supply shock, bursting of an economic bubble, or a large-scale man-made or natural disaster (e.g. pandemic).
In the United States, a recession is defined as "a significant decline in economic activity that is market-wide, lasts for more than a few months, and normally occurs in real GDP, real income, employment, industrial production, and wholesale-retail sales."[2][3] The European Union has adopted a similar definition.[4][5] In the United Kingdom, a recession is defined as two consecutive quarters of negative economic growth.[6][7]
Governments often respond to recessions by adopting expansionary macroeconomic policies, such as increasing the money supply and lowering interest rates or increasing government spending and reducing taxation.
