RECESSION definition economics
Introduction: A significant decline in activity across the economy, lasting longer than a few months. It is visible in industry production, employment, real income and wholesale-retail trade. The technical indicator of a recession is consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP), although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession trigger the onset. however, one-time crisis events can affect the financial system. As a result of such a wide-spread global recession, the economies of virtually all the world's risky investment strategies used by many large financial institutions, along with the truly global nature of the developed and developing nations suffered extreme set-backs and numerous government policies. were implemented to help prevent a similar future financial crisis.
A recession generally lasts from six to 18 months, and interest rates usually fall during these months to stimulate the economy by offering cheap rates at which to borrow money. Recession is negative economic growth for two consecutive quarters. This means a fall in real GDP - lower national income and lower national output. In economics, a recession is a general slowdown in economic activity over a sustained period of time, or a business cycle contraction. A period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters. A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. A recession is generally considered less severe than a depression, and if a recession continues long enough it is often then classified as a depression.
Characteristics of Recession
1) Rising Unemployment: Often unemployment is a delayed factor, i.e. , it takes time for unemployment to rise, but, even when the economy is recovering, it takes time for unemployment to fall.
2) Rising Government Borrowing: A recession is bad news for the government budget. A recession leads to lower tax revenues (lower income tax and corporation tax revenues) and higher government spending on unemployment benefits.
3) Falling Share Prices: Generally, a recession leads to lower profitability and lower dividends. Therefore, shares are less attractive. Note share prices often fall in anticipation of a recession, e.g. , the recent falls in share prices are largely because the market expects a recession soon. During the actual recession, share prices often increase in anticipation of the economy recovering. Note also, falling share prices do not always mean a recession, falling share prices can occur for many other reasons.
4) Lower Inflation: Typically a recession reduces demand and wage inflation. This should result in a lower inflation rate. However, this recession is complicated because of rising oil prices. Therefore, the upcoming recession may actually occur simultaneously with higher inflation and stagflation. But, a recession will definitely reduce demand, pull inflation pressures and encourage price wars on the high street as firms seek to retain consumers. a term known as stagflation.
5) Falling Investment: Investment is much more volatile than economic growth. Even a slowdown in the growth rate (economy expanding at a slower rate) can lead to a significant fall in
What is the main cause of a recession
The causes of recession on the Indian economy are following:
1) Increase in Unemployment: When there is a slight increase in the unemployment level and jobless persons living in the society; Then definitely people can judge that it is a period of recession. This is really bad for the Indian economy as it resists the national growth of the country.
2) Inflation of Products and Services: When the prices of production or manufacturing of goods and services along with various commodities are increased and the fossil fuels, petroleum also gaining flames then it will automatically resist growth of various industrial sectors.
3) Decrease in Prices of Stocks: As recession has big impact on the Indian economy. Therefore, the price of various stocks associated with the field where the recession has taken place has decreased.
4) Decrease in Prices of Property: It also decreases the price of property because due to lack of financial funds or capital funds no one is interested in purchasing any additional property or any other agricultural land.
5) Decrease in GDP: As GDP means Gross Domestic Production. It is associated with the development and production of various products and services in various sectors.
6) High Supply and Low Demand: With the recession, there is random decrease in the demand of a particular product as the supply is increasing at a rapid rate. This is really bad for the point of view of entrepreneur as it will make high loss of an industry or a company.
7) Fall of Companies: The sales of majority of companies decreases which in turn decreases their profit statistics as compared to the previous years and finally lead to the fall of the company.
8) Debit their Savings: When the people debited their savings or the investments in order to fulfill their day to day needs and requirements then they definitely matured their saving funds.
9) Kept under Debt: The lower sections of society who have taken loans or other financial funds from any organization will have in trouble. The survival for them is very difficult as they have a miserable condition.
ALSO READ: Effects of Recession on Business AND Remedies to Overcome Recession
