What is an Economic Recession? A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. What are the factors that causes economic recession ? Loss of Confidence in Investment and the Economy Loss of confidence leads consumers to stop buying and move into defensive mode. Once a critical mass moves toward the exit sign, panic sets in. Retail sales slow. Businesses run fewer employment ads, and the economy adds fewer jobs. Manufacturers cut back in reaction to falling orders—the unemployment rate rises. To restore confidence, the federal government and the central bank must step in. High-Interest Rates When interest rates rise, they limit liquidity, which is money available...