Define: Recession

UK Accounting Glossary

Definition: Recession


Quick Summary of Recession


A period of time when economic activity is on the decline.



What is the dictionary definition of Recession?

Dictionary Definition


In economics, a recession is a contraction in the business cycle when there is a general decline in economic activity.

  1. The act or an instance of receding or withdrawing.
  2. A period of reduced economic activity

Also:

  • The ceremonial filing out of clergy and/or choir at the end of a church service.

Period of general economic decline defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer. Typically marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). Although recessions are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes.


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Full Definition of Recession


Recessions in economics may be defined as a substantial decrease in economic activities in a particular economy. A recession normally lasts for more than a few months and has a tremendous negative impact on important aspects of the economy like industrial production, real income, employment, and both retail and wholesale trade. A couple of successive negative economic growth in a country’s GDP can be regarded as an indication of recession.

Recession is normally regarded as an unpleasant but usual part of a business cycle. The normal duration of recession ranges from half a year to one and a half year. Rates of interest normally go down when there is a recession. This is done in order to revive the economy through the facilitation of money borrowing processes.

As a rule of thumb, a recession is a fall of a nation’s gross domestic product (GDP) over two or more consecutive quarters. A recession is also referred to as a period of economic decline and reduced economic activity. Factors that may cause a recession to include overproduction, decreased demand, falling consumer and business confidence and major economic imbalances, among others. During a recession, the level of unemployment rises, investments decline, and prosperity lags. Real personal income and spending growth also have a tendency to slow if not decline during a recession. A recession can involve rapidly falling (deflation) or sharply rising prices (inflation). The average recession from 1945 to 2005 lasted about ten months but two went on for a record 16 months. The National Bureau of Economic Research is the official arbiter of what is and what is not a recession. A recession in one country can cause a recession to occur in others, specifically trading nations. A recession can be widespread and affect the entire economy or a recession can be industry-specific.

Bear Market

A bear market is one where prices of securities are going down. There is a lot of pessimism as far as various entities associated with a bear market are concerned and this implies that prices stay low. Selling of securities is very common in a bear market as investors are expecting to make losses.

Boom

Boom is a period in the economy when economic activities like sales increase at a rapid pace. In the case of share markets, boom takes place when there is a bull market. Busts, on the other hand, are related to bear markets. Since markets have a cyclical nature, booms and busts normally follow each other.

Business Cycle

In economics, the business cycle is defined as inconsistent levels of economic activities that keep repeating themselves for a considerable period of time. Business cycles were once thought to be predictable in nature but are presently regarded as being inconsistent.

Double-dip Recession

Double-dip recession is an economic situation whereby the rate of growth of gross domestic product of an economy comes down after a few quarters where there has been only a negligible amount of growth in the gross domestic product of the same.


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Examples of Recession in a sentence


Several major retailers cut back on inventory this Christmas season due to the recession.
Market forecasters have been talking about the probability of a recession for quite some time now.


Synonyms For Recession


regression, decline, throwback, lapse, retrogression


Cite Term


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Recession. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. March 31, 2020 https://payrollheaven.com/define/recession/.
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Recession. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/recession/ (accessed: March 31, 2020).
American Psychological Association (APA):
Recession. PayrollHeaven.com. Retrieved March 31, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/recession/

Definition Sources


Definitions for Recession are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 11th December 2019.