The Bad Impacts of Recession: What is, Why it Happens?

The word recession comes from the Greek word for ‘recession’. Recession is a milder form of a depression, where the economy loses jobs but does not fall into full-blown recessions.

The Bad Impacts of Recession: What is, Why it Happens?

What is the Recession?

A recession is when the economy goes through a period of falling prices and high unemployment. Recessions are usually caused by external factors, such as international trade or changes in technology.

The Recession Fact

The first recorded recession happened in 1854, during British rule in India. The years that followed saw several other recessions across Europe and Asia. It wasn’t until 1929 that it was first used in America.

Why Recession Happens?

Recessions happen when there is a decline in the volume of economic activity. This happens due to changes in the business cycle, which are caused by factors such as technological innovations, changes in consumer preferences, and economic policies. The business cycle is classified into two - upswing and downswing phases.

Recessions occur when the economy experiences an economic downturn. Recessions can last from a few months to several years depending on how severe it is and where it occurs in the economic cycle.

The most common causes of recessions are:

1. Economic Policy: Policymakers use fiscal and monetary policy tools to stimulate or slow down the economy, but this has a cost as well as benefits that must be weighed against each other before being implemented.

2. Demand Shocks: Demand shocks cause consumers to spend less money on goods or services because their income has declined significantly or they have lost their job due to poor performance in the economy.

3. Changes in Interest Rates: Interest rates are directly related to employment levels because they affect borrowing costs for businesses and individuals who lend money out (for example, banks). When interest rates rise, companies will pay more for loans and other forms of borrowing.

What happens during a Recession?

However, the exact cause of recessions is hard to determine because there are so many factors that affect how fast our economy grows and how long it takes to recover from a recession. However, some signs can help predict when an economy will enter a recession and what will happen during its duration:

1. Unemployment rate goes up: When unemployment rises significantly, it usually means that more people are looking for work and finding it difficult to find any. If this happens repeatedly over several years, it could mean that there is a problem with the economy and the overall tone of the economy has changed for the worse.

2. Consumer confidence drops: When consumers lose confidence in their future financial situation, they may start buying less expensive items like food or clothing instead of investing their money into assets such as stocks or bonds because they believe these investments will not give them good returns in future years.

The End Notes

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This may be a hard time for some people. I wish all the good for them.