What does a recession typically indicate in terms of economic conditions?

A recession typically indicates a significant decline in economic activity across the economy for an extended period. This is often evidenced by rising unemployment rates, as businesses tend to cut jobs during periods of reduced demand for goods and services. Additionally, gross domestic product (GDP) usually falls during a recession, reflecting lower overall economic output and spending.

The combination of rising unemployment and falling GDP illustrates the challenges faced by the economy during a recession. Consumer spending often decreases, leading to less revenue for businesses, which in turn can result in layoffs and a further contraction in economic activity. This cycle continues until conditions improve, leading to recovery.

In contrast, the other options reflect conditions that are generally not associated with a recession. Increased spending and rising interest rates can indicate economic growth rather than contraction. A stable job market with rising GDP typically signifies economic expansion, while high inflation and minimal job loss tend to occur in different economic contexts, often during a boom rather than a recession. Thus, the correct understanding of a recession emphasizes the relationship between rising unemployment and falling GDP.