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Definition: Recession

Recession is the period of reduced economic activity across an economy which is indicated by negative growth of GDP in two or more consecutive quarters resulting in reduced trade and industrial activities. A recession begins when the economy has reached a peak of activity and ends when it reaches trough. In US, National Bureau of Economic Research (NBER), a private research organization keeps a record of dates of recession and estimates future such dates based on several activities in the economy.

Recession have adverse effects on an economy like

  • Increase in unemployment
  • Drop in Stock Prices
  • Inflation decrease
  • Fall in household income
  • Fall in Business profits
  • Decrease in Investment spending

Based on the shapes generated, recessions are categorized into 4 types as below

There are also other shapes for recessions like WW shaped recession, inverted square root shaped recession, step down shaped recession etc.


There are different types of recession depending on the length, depth and effect of it like

Generally, a recession lasts for around 6 to 18 months. A prolonged recession leads to depression where output falls by more than 10%.

During recession, the government of particular economy tries its best to stabilize the economy by lending at cheaper rates and cutting in tax collection.

Hence, this concludes the definition of Recession along with its overview.

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