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In macroeconomics, recession is
defined as a distinct decline in any particular country's Gross
Domestic Product which is also called as GDP. In some other
cases, when a country faces negative real economic growth, for
two or more successive quarters of a year, that’s also termed as
state of recession. Though, the exact definition of recession
has always been controversial and economists tend to differ in
defining recession.
According to ‘The National Bureau of Economic Research’
recession is defined as "a significant decline in economic
activity spread across the economy, lasting more than a few
months." In general, recession affects a country’s overall
economic activities, including, investment, employment rate,
profits data of companies etc. Recession is almost always
accompanied by sharp increase in prices of commodities. When
recession continues for a long duration and with severe
implications, it’s termed as economic depression whereas
complete breakdown of economy is referred as economic collapse.
The exact causes of recessions are a subject of hot discussions
amongst the economists and academicians. However, the general
rule says, it’s caused by combination of several potential
dangerous factors. It could be caused by cyclical movement of
economy or by some external elements. Few major causes are;
inflation, currency crisis, speculation, national debt etc.
External reasons can be war and other factors which are beyond
the control of a particular economy. Apart from these, other
reasons can be high oil prices (as most countries depends upon
oil import for industrial growth), weather conditions, some kind
of national calamities among others. Several other economic
factors also affect recession factor like, lower interest rates
which adversely affect savings of households and consequently
banks. With very little savings, banks can not provide loans and
that causes severe bottleneck for major infrastructure projects
which finally lead to low economic growth and impending
recession.
The role of money supply is also very crucial in causing
recession. Inflation of money supply or mishandling of excessive
liquidity or even crunch of liquidity also invites recession.
Overall, economic recession badly affects any economy. Recession
implies inflation or deflation, foreclosures, bankruptcies and
banks lending less money etc. Author - Mritunjai kumar,
expert economist and prolific writer..
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