That’s called a recession. A recession is a significant decline in economic activity, marked by falling GDP, reduced spending, higher unemployment, and lower business profits. It often results from financial crises, reduced consumer confidence, or global events like pandemics.

Governments and central banks fight recessions using stimulus measures like cutting interest rates or increasing public spending to encourage growth. Recessions hurt both individuals and businesses, but they’re also part of natural economic cycles. Understanding GDP trends helps predict and prepare for such downturns.