The recession phase of the business cycle is typically associated with higher unemployment and lower output. The demand for products and services begins to rapidly decline during the recession phase. Economic indices including income, output, and wages begin to diminish as prices tend to drop.
As the economy enters the depression phase, growth is declining and unemployment is rising. An overheated economy, when demand exceeds supply, grows past full employment and the nation's resource capacity, can lead to recession. Although temporary overheating is possible, eventually spending will decline as supply catches up to demand. The recession phase of the business cycle.
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