Recession

A recession is a period in which an economy contracts rather than grows. A common rule of thumb defines it as two consecutive quarters of falling real gross domestic product, but the official arbiter in the United States is the National Bureau of Economic Research, which dates recessions by a "significant decline in economic activity that is spread across the economy and lasts more than a few months," considering employment, income, production and sales.

Recessions occur as part of the business cycle for various reasons, such as financial crises, inflation-fighting interest-rate increases, shocks to supply like oil price spikes, or events like the COVID-19 pandemic, which produced a short but deep recession in 2020. They are marked by rising unemployment, falling incomes and reduced investment, and typically end with recovery.

Governments and central banks respond with fiscal policy, such as unemployment insurance and stimulus, and monetary policy, such as lower interest rates. Politicians often argue over blame and the definition: the NBER's declaration usually comes months after the fact, and parties have disputed whether the economy was in recession during election years. Debates between Keynesian and other schools concern how much government should intervene.