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The recession is a situation in which economy faces contraction in GDP, employment, consumer spending, corporate profits, individual income and private/public investments. In this situation the GDP data starts showing negative growth and the term recession is only considered when the downturn in economic activity lasts for six to nine months.
What does government do in recession?
Government needs to react quickly in times of recession. Most government preferes policy of stimulus packages, lowering taxes, increasing liquidity supply and lowering interest rates. By lowering interest rate, borrowers can borrow money cheap and thus can spend accordingly, this boosts the consumer spending and economy. The government also ease norms for investents so that more investments can be attracted and thus more jobs can be created.
The best example of recession is the current U.S economic crisis or U.S recession. The government had acted swiftly and had announced enormous measures such as infusing liquidty, lowering lending rates and bailout packages. However, the effect of these measures can only be noticed after certain period of time.
What is difference between Slowdown and Recession?
Slowdown is very much differ than recession. In the economic slowdown the GDP data shows positive growth which is lower than estimated numbers or in comparison with year-on-year basis. Whereas, in recession the GDP data shows negative growth in year-on-year basis.