About Recession
Recessions are periods of economic slowdown, job losses and lower consumer spending. They can last for a few months or a couple of years, but they’re often followed by an economic upturn.
There’s no set formula for defining a recession, but most economists agree that a country is in a downturn when its GDP (Gross Domestic Product) shrinks significantly. The National Bureau of Economic Research, which judges whether the United States is in a recession, defines a recession as two consecutive quarters of decline in real (inflation-adjusted) gross domestic product. Other measures of economic activity, such as employment and the number of new businesses started, can also be used to define recessions, although they’re less widely recognized.
Some causes of recession are the result of government or corporate decisions, but many are due to unexpected events outside a country’s control. Wars, pandemics and international financial collapses can all create uncertainty that leads to people and businesses holding off on spending and investing for fear of future trends. This, in turn, can slow economies.
Other factors that can cause a recession include tight monetary policy, which can lead to rising inflation and decreases in business investment. And problems in financial markets, such as a credit crunch that restricts the availability of money, can have a similar effect. If you’re concerned about the possibility of a recession, take steps to prepare. For example, start by creating a budget that prioritizes needs over wants. Make sure to cut back on discretionary expenses like entertainment, cable and clothing. And don’t forget to add money to your emergency savings fund.
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