A recession is a significant, widespread, and prolonged downturn in economic activity. It is often identified by two consecutive quarters of negative GDP growth, although more complex formulas can also be used. Economists at the National Bureau of Economic Research (NBER) measure recessions by looking at various indicators such as nonfarm payrolls, industrial production, and retail sales. A downturn must be deep, pervasive, and lasting to qualify as a recession by NBER's definition, and many recessions are identified retroactively. Recessions can have self-perpetuating effects on the economy. Declining consumer demand can lead companies to lay off staff, which further weakens consumer spending power. Bear markets that often accompany recessions can also reduce wealth, further trimming consumption. Governments use fiscal and monetary policies to mitigate the impact of recessions. These measures include unemployment insurance and cutting interest rates to stimulate investment and spending. Various indicators and theories attempt to predict and explain recessions. An inverted yield curve has preceded each of the last 10 U.S. recessions, although not every inverted yield curve leads to a recession. Economic, financial, and psychological factors all play roles in causing recessions. For example, a sharp rise in oil prices can lead to higher costs across the economy, while financial risks accumulated during good times can contract credit during downturns. Psychological factors like over-exuberance during booms and deep pessimism during downturns also contribute to recessions.
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Understanding Recessions: Causes, Indicators, and Responses

A recession is a significant, widespread, and prolonged downturn in economic activity. It is often identified by two consecutive quarters of negative GDP growth, although more complex formulas can also be used. Economists at the National Bureau of Economic Research (NBER) measure recessions by looking at various indicators such as nonfarm payrolls, industrial production, and retail sales. A downturn must be deep, pervasive, and lasting to qualify as a recession by NBER's definition, and many recessions are identified retroactively.

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