Definition:
A recession is a downturn in economic activity that leads to widespread unemployment, and a drop in economic output and demand.
Example:
- The COVID-19 pandemic caused businesses to have to close shop, resulting in huge losses to businesses around the world.
- These businesses had to lay off hundreds of thousands of employees, resulting in mass unemployment.
- People no longer had a steady source of income, meaning they were unable to spend money on goods and services.
- This reduced demand hit businesses’ revenues, further contributing to their losses.
How Does a Recession End?
- Government aid is crucial in ending a recession.
- Central banks can help by changing monetary policy.
FAQs
What does recession mean?
Recession is a downturn in economic activity that leads to widespread unemployment and a rise in prices.
What happens in a recession?
Recession causes unemployment, drop in demand and a drop in economic output.
How do we know if we are in a recession?
A recession can be measured by drop in GDP, economic output and a rise in rates of unemployment.
