Recession

Definition of Recession

The word recession is mainly associated with a big decline in the economic activity of a country in terms of industrialization, employment and other such activities. It is such a condition where people have no employment or the employment is very scarce. It is also indicated by a steep decrease in the growth of economy as measured in the terms of Gross Domestic Product (GDP). It is also defined as a slowdown of the business cycle throughout the country. If we look from the macroeconomic view, then the indicators like GDP, employment of people, capacity utilization, spending on investment, household incomes, and profits in business and inflation sharply declines.

The prime causes of recession

Recessions are mainly known to occur when people spend less and less in the market, a term which can be technically known as an adverse demand shock. In can occur due to a variety of reasons like financial crises, the burst of an economic bubble, on the basis of an external trade or it may simply occur due to a shortage of supply. Economic bubble is a term which is coined by the economists to denote a condition where everything occurs on the basis of speculation. Governments generally try to prevent the economic slowdown or the recession by increasing the supply of money, by increasing the expense of the government or by reducing the taxes.

During the recession period you can observe a very selfish mentality of people. Maximum number of people tries to keep the money in their hand as much as possible. People forget that one man’s expense is the source of income for someone else and thus inflation causes the entire economy to fall down.

If you think about the global recession which is going on nowadays, the businessmen or the people who are wealthy enough do not invest in any business because they are apprehensive of an economic speculation which is already discussed as an economic bubble before. Thus with the help of a declining economic activity in the country or globally the common man suffers the inevitable fate of becoming unemployed and spending very less and less by leading the life of hardship.