what is a recession?

Answer 1

Close, but not quite.

A recession is two successive quarters (not necessarily 6 successive months) or more of negative year-on-year real (as opposed to nominal) GDP growth. It is not defined as negative value GDP as you can't have negative GDP. You can have positive *NOMINAL* GDP growth, but if inflation is higher than nominal GDP growth, you have negative real GDP growth.

It's not *usually* GDP, it's always GDP (as opposed to GNP) by definition.

Also, a recession is not usually caused by hyperinflation or retrenchment. Hyperinflation is usually caused by an overheating economy or massive monetary liquidity (e.g. printing money due to massive budget deficit like in Zimbabwe). It is only in rare cases that you get hyperinflation with a recession (assuming that you have Keynsians running the economy rather than Banana Republic despots). The technical term is called "stagflation".

Typically inflation DROPS in a recession. Using the wage method - total wages drop as people get retrenched, perks get cut and bonuses shaved. Using the cost method, prices drop as sagging demand undershoot existing supply. Using the value-add method of GDP calculation, less manufacturing/services are performed on basic materials to make them into finished products.

Retrenchment is an lagging indicator of the economy, not a leading indicator. Also, retrenchment is usually not massive. While you probably meant that as a colorful embellishment, we're talking "only" a few million jobs, which is only a few percentage points. Sucks for people who were in the retrenchments, but not massive.

Recessions are usually caused by rising interest rates, exogenous shocks, tightening in monetary supply or tightening of fiscal policy.

Where you hit the nail on the head was political instability. "It the economy, stupid" almost always wins elections (except this last one).

Don't get me wrong. The previous post was a fine answer, but I'm just being an anal-retentive know-it-all nerdnick.

Answer 2

it is when the national output falls consistently for 6 months or more. usually it is related to the GDP (gross domestic product), having a negative value. the economy is said to have a negative growth compared to previous years. it is usually caused by a variety of factors which includes hyperinflation, mass retrenchment which leads to major unemployment and also political instabilities