How Recessions Work

What actually constitutes a recession? Who decides when the economy is in recession, and on what grounds? When a nation's economy enters a recession, is life guaranteed to get harder for most of its citizens? And how often does a recession lead to a depression?

On Nov. 26, 2001, the news media announced the United States was officially in a recession and had been since March of that year. To most Americans, this wasn't all that surprising: Rising unemployment and a weak stock market had been in the news for months.

­On Jan. 21, 2008, stock prices tumbled around the world. Most analysts pointed to fears surrounding the United States economy and a possible recession as the reason for the drop. Ironically, economic conditions in the United States were affecting the world economy on a day when its own markets weren't even in session -- they were closed for the Martin Luther King Jr. Day holiday. Three days later, news outlets were already reporting a new economic stimulus package, designed in part to try to prevent a recession.

Both the 2008 market drop and the 2001 news blitz raised a lot of questions.