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A recession implies at least two quarters of negative economic activity. [1] It is a increase in an economy's unemployment; output and profits fall; personal income falls.

Broader definitions of an economic recession are often used. Investopedia defines an economic recession: "A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession."[2]

There may also be a decline in personal and business optimism, and a decline in the rate of consumption and capital investment in business activity.

job growth 1960-2009, with recessions in gray

Recessions are defined using a number of advanced indicators by the National Bureau of Economic Research, a private think tank that includes both conservative and liberal economists.[3]

As a rough rule of thumb, a recession is underway when there is a decline in gross domestic product (GDP) for two consecutive quarters.



Several strategies exist for dealing with recession:

  • Keynesian economics indicate deficit spending by government will deal with any short term losses by business.
  • Supply-side economics indicate government tax cuts will promote business capital investment.
  • laissez-faire economics recommend the government do nothing and not interfere with market forces.

See also

External link


  1. Money magazine
  2. Recession
  3. See US Business Cycle Expansions and Contractions
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