What is a Recession?
A recession is a period of time when businesses are struggling. GDP, which measures the growth of goods and services made in a specific period, is lower than the growth of the previous period. A recession can last for 8 months or longer.
Watch the full episode of What is a Recession and what happens in this period?
What happens during a recession?
Recessions have a negative impact on employment, production, and consumption. Consumers have less income and are likely to spend less. The decrease in spending reduces the sales of goods and services of businesses. They, in turn, are likely to lay off workers and decrease output in order to match the reduced demand. This puts even more people out of work.
When the economy is in recession, most families cut back on grocery and restaurant meals, clothing purchases, and vacations. Families also reduce spending on shopping and use the extra room in the budget to save money. It is important to have additional sources of income when the economy is down.