Economic recession

Definition

An economic recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in real GDP, income, employment, manufacturing, and retail sales. During this period, businesses may face lower demand, leading to layoffs and increased unemployment, which further impacts consumer spending and economic growth. Economic recessions often prompt government intervention and policy changes aimed at recovery, especially in relation to social welfare systems.

5 Must Know Facts For Your Next Test

1. Economic recessions are typically defined as two consecutive quarters of negative GDP growth.
2. The late 20th century saw significant recessions that prompted shifts towards conservative economic policies, including austerity measures and reduced government spending on social programs.
3. Recessions can lead to increased poverty rates as unemployment rises and families struggle to make ends meet.
4. In response to a recession, governments may implement stimulus packages aimed at boosting economic activity through investment in infrastructure or direct financial support to individuals.
5. The impact of recessions is often uneven, disproportionately affecting lower-income individuals and communities while wealthier segments may recover more quickly.

Review Questions

• How does an economic recession influence the government's approach to social welfare programs?
  • During an economic recession, governments may reconsider their approach to social welfare programs due to increased demand for assistance from citizens facing unemployment and financial hardships. This can lead to a reevaluation of funding for programs like unemployment benefits, food assistance, and housing support. However, conservative shifts during this period might also prompt cuts in social welfare funding as governments aim to reduce deficits, creating a tension between fiscal responsibility and the need for social support.
• Discuss the relationship between economic recessions and unemployment rates during the late 20th century.
  • Economic recessions in the late 20th century were characterized by significant increases in unemployment rates as businesses faced reduced consumer demand. This period saw layoffs across various sectors, leading to higher unemployment figures that created a cycle of decreased spending power among consumers. The rising unemployment also influenced political debates about welfare reform and government intervention, highlighting the need for policies aimed at mitigating the effects of economic downturns on vulnerable populations.
• Evaluate the long-term effects of economic recessions on social policy reforms in the late 20th century.
  • The long-term effects of economic recessions on social policy reforms during the late 20th century included a shift towards more conservative approaches to welfare systems. As governments responded to economic downturns with austerity measures, there was a push for reforms that emphasized personal responsibility over state support. This period witnessed the introduction of stricter eligibility criteria for welfare programs and an increased focus on job training initiatives. These changes reflected a broader ideological shift towards reducing government spending on social safety nets, which had lasting impacts on how societies approached poverty alleviation and economic support.

Related terms

Gross Domestic Product (GDP): A monetary measure representing the market value of all final goods and services produced in a country during a specific time period, used as a broad measure of overall economic activity.

Unemployment Rate: The percentage of the labor force that is jobless and actively seeking employment, often rising during economic recessions due to layoffs and hiring freezes.

Fiscal Policy: Government policies regarding taxation and spending that influence economic conditions, particularly used during recessions to stimulate growth through increased public spending or tax cuts.