What Is Recession

What Is Recession

economics, the term recession generally describes the reduction of a country's gross domestic product (GDP) for at least two quarters.[1][2] The usual dictionary definition is "a period of reduced economic activity", a business cycle contraction.[3][4]

The United States-based National Bureau of Economic Research (NBER) defines economic recession as: "a significant decline in [the] economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."[5]
[hide]Predictors of a recession

There are no completely reliable predictors. These are regarded to be possible predictors.[6]

* In the U.S. a significant stock market drop has often preceded the beginning of a recession. However about half of the declines of 10% or more since 1946 have not been followed by recessions.[7] In about 50% of the cases a significant stock market decline came only after the recessions had already begun.
* Inverted yield curve,[8] the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate.[9] Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator;[10] it is sometimes followed by a recession 6 to 18 months later[citation needed].
* The three-month change in the unemployment rate and initial jobless claims.[11]
* Index of Leading (Economic) Indicators (includes some of the above indicators).[12]

[edit] Responding to a recession

Strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow. While Keynesian economists may advocate deficit spending by the government to spark economic growth, supply-side economists may suggest tax cuts to promote business...

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