Which economic term refers to a decline in the economy resulting in decreased disposable income?

A recession refers to a period of economic decline typically characterized by a reduction in gross domestic product (GDP), decreased consumer spending, and subsequently, lower disposable income for households. During a recession, businesses often experience lower sales and may respond by reducing their workforce or limiting production, which further exacerbates the decline in disposable income. This can lead to a cycle of decreased consumer confidence, reduced investment, and overall economic stagnation.

While inflation, depression, and stagnation are all economic terms that describe different conditions, they do not specifically capture the scenario of an immediate decline resulting in decreased disposable income as accurately as a recession does. Inflation indicates rising prices, depressions suggest a more prolonged period of economic downturn, and stagnation implies little to no growth rather than a specific decline in the economy.