What Is a Recession?

Answer:

A recession is a decrease of less than 10% in a country’s Gross Domestic Product (GDP). The decrease must last for more than one consecutive quarter of a year. The GDP is defined as the sum of private spending and government spending on goods, services, labor and investment.

Many opinions exist about what a government should do to combat a recession. They include:

• Increase money supply (make money easier to come by).
• Decrease taxation (decrease the tax burden businesses and individuals).
• Increase government spending (expand infrastructure).
• Relax business policy restrictions (encourage business growth).

A recession usually leads to the following:

• Massive profit reduction
• Unemployment growth
• Overall inflation
• Price growth