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What is a Recession?

Over the past few months, the economy has been in a decline. Stock markets have been bearish, and inflation has been rising. There have been talks of preparing for a possible recession, but what does that mean?

A recession is a significant decline in economic activity over a span of months to years. During a recession, unemployment rises, the economy suffers, business declines, and overall economic output decreases.

Recessions are considered an unavoidable part of the business cycle. The point at which the economy officially falls into a recession depends on a variety of things. Some of those factors playing part in the decline could be a sudden economic shock, excessive debt, inflation, and even deflation. A recent event causing a recession is the COVID-19 pandemic which sent the economy into a recession for a few months. Businesses were in shambles and the country essentially went into a lockdown forcing a rather quick recession. The COVID-19 recession was said to have been the deepest but shortest recession ever; the country’s GDP (the size of the economy) dropped by nearly 30% from February 2020 through April 2020.

Sources:

• https://www.investopedia.com/terms/r/recession.asp
• https://www.forbes.com/advisor/investing/what-is-a-recession/