What Is an Economic Recession?
The idea is to stimulate the economy; but
Hi, I'm Jim Flink for About.com and today I'll be covering the definition of an economic recession.A recession is a slowdown in economic activity, a slowdown in business orders and a general contraction in the macro economy. The generally accepted definition of a recession by the National Bureau of Economic Research is when there is a significant decline in economic activity that lasts more than a few months.The answer to that question is subjective, but most economists attribute recessions to naturally occurring economic elements such as:An example of this is the recent sub-prime mortgage issue. Homes were so easy to obtain through easy lines of credit that the price of homes rose very quickly, which then led to a real estate bubble. When the bubble burst, the economy quickly fell into a deep recession.Finally, the government can deal with recessions in different ways. Most modern economists prefer what's called expansionary macroeconomic policy during a recession. The idea is to stimulate the economy, but the method is widely disputed. Some argue for increased government spending. Some argue for tax cuts and grants while others argue for monetary policy in the form of interest rate reduction.That was a quick look at economic recessions. For more info, be sure to check out About.com. Thanks for watching.