What is a Recession?
- A recession is a sustained economic decline. An economy is usually regarded to be in a recession if it experiences a decline in GDP for two consecutive quarters.
- Recession
An economy that is in a recession is a shrinking economy.
Recessions are usually accompanied by a decrease in production, a general fall in household income and an increase in unemployment.
What should I do during a recession?
During a recession there will be a lot of gloom and doom in the air.
Industries will fail and businesses will close down. Some people will see their income fall. Some people will loose their jobs.
The best thing to do during a recession is to be prepared before the time.
If you have an emergency fund, you will be able to survive and stick out the recession until the economy improves again, even if you loose your source of income.
Recessions are usually followed by a period of sustained economic growth. Recessions often provide good opportunities to make investments and expand businesses.
During a recession, many people will be scared to make investments because of all the bad news in the air, or they simply will not have any funds available with which to make investments.
The market value of many investments will be available for purchase at below their intrinsic value. If you have cash available during a recession, you are in a fortunate position.
If you do not have an emergency fund or spare cash saved away when a recession strikes, your best options are to reduce your expenses as much as possible, delay purchasing of big-ticket items such as new vehicles, and use any additional money you available to pay off debt.
What should government do during a recession?
Many opinions exist about what a government should do to combat a recession. They include:
- Increase money supply (make money easier to come by).
- Decrease taxation (decrease the tax burden businesses and individuals).
- Increase government spending (expand infrastructure).
- Relax business policy restrictions (encourage business growth).
This definition is part of the Dictionary of Financial Terms. If you want to receive a notice every time a new definition is published, you can subscribe to Liberta.
July 2nd, 2009 at 01:32 am
Ugh. I did all the wrong things during this recession….hubby just upgraded his car, bought daughter car (she’ll pay back in a couple of years), bought new furniture, and have only 3500.00 in savings. sigh.
July 2nd, 2009 at 09:42 am
Thanks for sharing such great post, it gives clear idea of recession.
July 2nd, 2009 at 01:53 pm
@ Francois: Here is a quick explanation of a recession and a depression at the same time.
A recession is when you see your friend standing on a street corner with a board around his neck, a depression is when you join him.
July 2nd, 2009 at 06:34 pm
@Johan
Well that just about sums it up yes.