What is a Recession?

A recession is a financial state wherein economic activities reduce or contract for a minimum of six months or two quarters. Recessions affect both the government and the people. Due to reduced sales and low production, inflation soars resulting in job loss and reduced budget spending. Interest rates shift as the central bank cuts rates to support the economy.

The government now faces an increased spending budget driven by social security and unemployment insurance. The government also receives fewer tax revenues, and must now rely on reserves.

Another way to view recessions is the relationship between economic activity and consumer confidence. Whenever the economy shrinks due to redresses in business investments, there is an increase in economic stress. This triggers negative reactions such as: