In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). ... In a recession, the rate of inflation slows down, stops, or becomes negative.

How are recessions caused?

Recessions can be caused by an overheated economy, in which demand outstrips supply, expanding past full employment and the maximum capacity of the nation's resources. Overheating can be sustained temporarily, but eventually spending will fall in order for supply to catch up to demand.

How did the 2008 recession happen?

The Great Recession, one of the worst economic declines in US history, officially lasted from December 2007 to June 2009. The collapse of the housing market — fueled by low interest rates, easy credit, insufficient regulation, and toxic subprime mortgages — led to the economic crisis.