A period of temporary economic decline, typically defined as two consecutive quarters of falling GDP, is called a recession.
The phrase “two consecutive quarters” is a widely used rule of thumb, especially in discussions of technical recessions. However, it is not the universal official test. In the United States, the National Bureau of Economic Research considers the depth, duration, and spread of declines across indicators such as employment, income, industrial production, and sales.
A recession is different from a depression, which generally describes a longer and more severe economic collapse. Stagflation means high inflation combined with weak growth or unemployment, while recovery is the period in which economic activity rises after a downturn.
Recessions are dated from a peak in economic activity to a subsequent trough. Policymakers may respond with lower interest rates, increased government spending, tax reductions, or other measures intended to support demand and employment.