A recession is a decline in any country's Gross Domestic Product (GDP), or negative real economic growth, for two or more successive quarters of a year. However, this definition is not universally accepted. The National Bureau of Economic Research defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. A devastating breakdown of an economy is called economic collapse. Newspaper columnist Sidney J. Harris amusingly distinguished terms this way: a recession is when you lose your job; a depression is when I lose mine.

The precise causes of recession are the subject of fierce debate among academics and policy makers although most would agree that recessions are caused by some combination of endogenous cyclical forces and exogenous shocks. For example, Keynesian economists and Real business cycle theorists would all disagree about the precise cause of the business cycle breakdown, but most would agree that purely exogenous factors like the price of oil, weather conditions, or a war could by themselves cause a temporary recession, or, conversely, short term economic growth. Keynes himself, however, pointed out that when interest rates get too little -- below about 2% -- than people no longer have an incentive to save, preferring to hold money for what he called transactions demands. If there are no savings, banks get no money with which to make loans, and it is is drying up of savings -- and loans -- that caused the regular business cycle to break down, according to Keynes. Austrian school economists hold that it is an inflation of the money supply that causes modern recessions and that recessions are positive forces in-so-much that they are the market's natural mechanism of undoing the misallocation of resources present during the boom or inflationary phase. Most monetarists believe that the cause of most recessions in the United States is this mishandling of the money supply, while extreme changes in the structure of the economy are responsible for very few.