Definition: Recession is a slowdown or a massive contraction in economic activities. A significant fall in spending generally leads to a recession.

Description: Such a slowdown in economic activities may last for some quarters thereby completely hampering the growth of an economy. In such a situation, economic indicators such as GDP, corporate profits, employments, etc., fall.

This creates a mess in the entire economy. To tackle the menace, economies generally react by loosening their monetary policies by infusing more money into the system, i.e., by increasing the money supply.

This is done by reducing the interest rates. Increased spending by the government and decreased taxation are also considered good answers for this problem. The recession which hit the globe in 2008 is the most recent example of a recession.