What defines a recession in economic terms?

A recession is defined as a significant decline in economic activity across the economy, lasting more than a few months. The most common measure of this decline is through the real Gross Domestic Product (GDP) of a country. When real GDP declines for two consecutive quarters, it signals a sustained drop in economic performance, indicating that the economy is contracting rather than expanding. This can lead to various negative outcomes, such as rising unemployment rates and reduced consumer spending, as businesses pull back on investment and production in response to decreased demand.

In contrast, other options reference concepts that do not accurately describe a recession. A period of economic growth would indicate an expansion, not a recession. An increase in employment rates suggests a strengthening economy, while stagnation in consumer spending might occur during a recession but does not itself define the economic condition. Thus, the definition of a recession is best captured by the decline in real GDP over two consecutive quarters.