What does recession mean in simplified terms? How does it start and end?

Question

What does recession mean in simplified terms? How does it start and end?

Answer 1

A RECESSION is a period of slow or negative economic GROWTH, usually accompanied by rising UNEMPLOYMENT. Economists have two more precise definitions of a recession:  (1) Two consecutive quarters of falling GDP (gross domestic product), which can be readily ascertained from Department of Commerce statistics; or (2) a time interval when an economy is growing at less than its long-term trend rate of growth and has spare CAPACITY.  The latter definition is operationally much harder to prove.

Recessions are often phenomena of the BUSINESS CYCLE, which inevitably has its ups and downs, especially in terms of such economic measures as unemployment rates and STOCK MARKET fluctuations.  However, recessions can also be caused by political or natural events, such as weather disasters, wars, changes in political leadership, or legislative enactments.

Recessions end when the economy recovers, which can be defined as a quarter or more of GDP growth, a quarter or more of increase in stock market indices, or a quarter or more of decline in the unemployment rate.  Other economic measures, such as wage rates, inflation, and balance of payments, can also be employed in determining whether a recession exists, and when it ends.

Answer 2

Lets be very simple here:

1) People spend lots and lots of money, get into debt.

2) Government needs people to stop spending money, inflation is going up (people have to pay more for food)

3) Interest rates rise to stop people spending so much.

4) Things cost even more

5) People can't afford to pay off their debt or buy things.

6) People have to sell their houses.

7) Recession.

8) Eveyone STOPS spending money and starts saving.

9) Prices have been dropping slowly as people can't afford things anymore.

10) Economy slowly recovers

11) People start spending money again.

12) Cycle slowly starts again.