Recession (economics)
A recession is a significant, sustained decline in economic activity, commonly reflected in falling output, income, employment, and spending.
Aggregate demand: Total planned spending on final goods and services in an economy at different price levels. When aggregate demand falls, firms sell less, cut production, and may lay off workers.
Gross domestic product: The market value of final goods and services produced within a country during a given period. Real GDP is a common measure of whether economic output is contracting.
Depression (economics): An exceptionally severe and prolonged economic contraction. A depression is generally deeper and longer-lasting than an ordinary recession.
Monetary policy: Central-bank actions that influence interest rates, money, and credit conditions. Central banks may lower rates or provide liquidity to cushion a recession.
Great Depression: A worldwide economic crisis beginning in 1929, marked by severe output declines and mass unemployment. It is the clearest historical example of a contraction far more severe than a typical recession.
Business cycle: The recurring fluctuations in economic activity, including expansions and contractions. A recession is the contraction phase of the business cycle.
Real GDP: Gross domestic product adjusted for changes in prices. Removing inflation helps distinguish falling production from falling prices.
Stagflation: An economic condition combining high inflation with weak growth and elevated unemployment. Stagflation describes a mix of outcomes, not simply a sustained decline in activity.
Fiscal policy: Government decisions about taxation, spending, and borrowing. Temporary spending increases or tax relief can support demand during a downturn.
Early 1980s recession in the United States: A severe U.S. downturn in the early 1980s associated with tight monetary policy and high interest rates. It shows how disinflationary policy can bring substantial short-term economic contraction.