What is an economic recession?

An economic recession is characterized by a period of temporary economic decline, marked by a reduction in trade and industrial activity. This decline is typically visible in declining GDP, increased unemployment rates, and a slowdown in consumer spending and business investments. During a recession, economic output contracts, which leads to diminished economic performance across various sectors. The significance of this definition lies in recognizing that a recession does not merely reflect short-term fluctuations; rather, it represents a sustained downturn in economic performance, often lasting several months. The events associated with a recession can lead to a widespread reassessment of economic policies and strategies as governments and institutions work to stimulate recovery.

In contrast, options describing a period of stable economic growth, prolonged expansion, or high inflation focus on beneficial economic conditions rather than a decline, failing to capture the essence of a recession.