A recession may be broadly defined as a considerable decline in economic activities all across the country or region (as the case may be). A recession to be classified as such, must last longer than at least a few months.
If the recession persists beyond a few months, stretching on for years with a steep 10% or more drop in GDP (Gross Domestic Product) levels, this is called an economic depression. The worst case was the global depression brought on by the stock market crash of 1929 in USA.
In macroeconomic terms, negative economic growth for at least two consecutive quarters would be referred to as a recession. It typically heralds a slowdown or slump in the national economy that affects all aspects of production, trade as well as investment as they are measured in the nation’s GDP. A steep decline in capital assets such as property and financial assets such as shares and stocks is also a classic tell tale sign of a recessionary trend in the economy.
During a recession, economic activities slow down effectively, leading to a surge in unemployment levels. And since people don’t earn money, they have little to spend, and without spending, both production and trade take a hit as the vicious cycle is perpetuated.
Studies have also shown a direct correlation between recessionary trends as well as crime since unemployed people often seek recourse to criminal activities to make ends meet.
To help curtain a recession and turn the economy around, various measures are undertaken. The economic leadership of a country tends to loosen its overall monetary policies by injecting more money into the system such as increasing the supply of liquid money.
The easiest way of doing this is to lower interest rates as well as increase govt. spending on development projects. This would have the dual advantage of not only increasing employment but also jump starting industrial activities in the private sector.
Decreasing taxes is also a handy way of handling runaway recession. Low taxes would mean people would have higher disposable income and would be willing to spend more. Greater spending would mean more production.
Financial education is so important, but barely taught at all in our schools. Having resources online is great, but not if they are inaccessible to so many. Thanks 508!