What Causes a Recession?
There are numerous theories among economists that can explain why an economy enters a recession. The psychological, economic, financial, or combined factors—some of the most prevalent ones—are the primary focus of these theories.
- Economic Factors: Numerous economists suggest that industrial production and a shift in economic trends, including structural changes, are some of the main factors that can lead to a recession. A recession could result, for instance, from significant price increases in crude oil.
- Financial Factor: Monetary elements like the accumulation of financial risk, the expansion of credit, and the insufficient growth of the money supply, according to many experts, are also significant contributors to the recession.
- Psychological Factors: Psychological factors lead to a recession including being overly enthusiastic and making more investments during economic booms and being deeply pessimistic during recessions.
- Combined Factors: The majority of the time, a recession is the result of several factors working together to cause it.
Recession: What it is and causes it?
Recession is one of the major factors that can disrupt the continuous economic growth of a nation. A large-scale, widespread economic downturn that hurts a nation’s economic growth is known as a recession. The standard rule of thumb is that an economy is said to be in a recession if it has a negative GDP for more than two consecutive quarters. However, even though this short period of recession, causes great damage to the country’s economy, as it results in unemployment, leading to increased poverty.
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