What is a "recession"?

A recession is defined as a significant decline in economic activity that lasts for an extended period, typically reflected in metrics such as GDP, income, employment, manufacturing output, and retail sales. During a recession, economic growth slows down, leading to higher unemployment rates and reduced consumer confidence. This decline can result from various factors, including decreased consumer spending, reduced business investment, or external shocks to the economy.

Understanding the context of a recession is essential. It indicates that the economy is contracting rather than growing, causing broader implications for businesses and households. Other options, such as economic expansion or increases in consumer spending and inflation rates, describe different economic conditions that do not align with the characteristics of a recession. In a recession, you would typically see a reduction in spending and investment and an increase in layoffs and bankruptcies, contrasting sharply with expanding economic conditions.