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In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity.[1][2] Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster (e.g. a pandemic). But there is no official definition of a recession, according to the IMF.[3]
In the United States, a recession is defined as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."[4] The European Union has adopted a similar definition.[5][6] In the United Kingdom and Canada, a recession is defined as negative economic growth for two consecutive quarters.[11]
Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply and decreasing interest rates or increasing government spending and decreasing taxation.
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