A financial downturn refers to a period when the economy experiences a decline in performance, often characterized by reduced consumer spending, lower business investment, and rising unemployment. This can lead to a decrease in the overall gross domestic product (GDP) and can affect various sectors, including housing, retail, and manufacturing. During a financial downturn, businesses may struggle to maintain profitability, leading to layoffs and closures. Governments often respond with measures such as stimulus packages or interest rate cuts to encourage spending and investment. Historical examples of financial downturns include the Great Depression and the 2008 financial crisis.