What is Economic Recession?

Economic Recession

 Economic recession is a period of general economic decline and is typically accompanied by a drop in the stock market, an increase in unemployment and a decline in the housing market.
 
An economic recession is when growth slows, usually due to a fall-off in consumer demand. As sales drop off, businesses stop expanding. Soon afterwards, they stop hiring new workers. By this time, the recession is usually underway. However, it doesn’t affect most people until layoffs begin. As unemployment rises, and consumer purchases fall off even more, housing prices usually decline.
 
An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time. The only good thing about a recession is that it cures inflation.
 
Factors that Cause Recessions
i. High interest rates:
High interest rates are a cause of recession because they limit liquidity, or the amount of money available to invest 
 
ii. Inflation:
Inflation refers to a general rise in the prices of goods and services over a period of time. As inflation increases, the percentage of goods and services that can be purchased with the same amount of money decreases. 
 
iii. Reduced consumer confidence:
Reduced consumer confidence is another factor that can cause a recession. If consumers believe the economy is bad, they are less likely to spend Money. Consumer confidence is psychological but can have a real impact on any economy. 
 
iv. Reduced real wages: Reduced real wages another factor, refers to wages that have been adjusted for inflation. Falling real wages means that a worker’s paycheck is not keeping up with inflation. The worker might be making the same amount of money, but his purchasing power has been reduced.
 

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