recession

A period of general economic decline, spread across the whole economy for longer than a few months. Recessions are usually cited as a decline in GDP for two or more consecutive quarters. This decline reflects the slowdown in industrial production, employment, income growth, retail and/or wholesale activity.



Recessions are normal components of the business cycle, and should be expected from time to time. Historically in the US, they last six to eighteen months in length, and come every ten to fifteen years.



Central banks will usually lower interest rates to during recessions. These lower rates decrease the costs to borrow money, and typically stimulate investment and recovery.



The bond market yield curve may also be used to predict recessions, as the sum activity of debt market participants change the shape of the yield curve to predict how central banks change interest rates in reaction to future economic events. More information on the Yield Curve.


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