In economics, a recession is a business cycle

Business cycle

The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

 contraction, a general slowdown in economic activity. During recessions, many macroeconomic

Macroeconomics

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

 indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization

Capacity utilization

Capacity utilization is a concept in economics and managerial accounting which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity...

, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock

Supply shock

A supply shock is an event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good. This sudden change affects the equilibrium price....

 or the bursting of an economic bubble

Economic bubble

An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

.