It is defined as two consecutive quarters of negative GDP growth, that is, falling GDP. ( Decrease in GDP, where the economy gets smaller, is not the sames as a decrease in GDP growth, which is where the economy continues to grow, but in a slower rate.) During a recession, falling aggregate demand will lead firms to lay off workers, so unemployment rises. If more people are unemployed, there will be even more spending. Low levels of demand result in lower rates of inflation, or even deflation.