Recession Definition

Definition & Meaning:

This is a period of economic downturn which lasts for at least 6 consecutive months (two quarters). In economics, the performance of a country's economy is measured by its 'Gross Domestic Product (GDP)'. So if a country's GDP falls between one quarter and another (the GDP in April to June is less than that in January to March), it is called an economic downturn. And if it falls again in the next quarter (July to September), it is called a 'recession'.

Why recessions happen varies, but the one thing they all have in common is a lack of confidence in the economy. As a result, both people and businesses invest and spend less (so prices fall). This causes business profits and income to fall, which then results in business bankruptcies and a rise in the unemployment rate, which causes even less investment and spending. It becomes a vicious cycle.

When a recession ends and an economy starts to grow in size (called 'economic expansion') again, this is called a period of 'economic recovery'.

Whereas if a recession (continuous falling GDP) lasts for two or more years (8 quarters), it is known as a 'depression'.

Pronunciation:

Related Vocabulary:

GDP, Economic Downturn, Economic Depression, Inflation.

Exercises:

To learn more vocabulary connected to economics, you can do a free online exercise on describing how the economy is performing.