♂️What is a recession and why it happens 📉

☀️A recession is a significant, widespread, and prolonged downturn in economic activity. It generally occurs when there is a widespread drop in spending.

☀️Recessions are measured by nonfarm employment, industrial production, and retail sales. But it is much simpler to define a recession as "Two consecutive quarters of negative GDP" 💸

♂️What causes recession:

▪️ Sudden economic shocks (like the oil crisis in the 1970s and the recent COVID-19 pandemic).

▪️ Excessive debt can lead to defaults and bankruptcies, destabilizing the economy.

▪️ Asset bubbles can cause market crashes and recessions (like irrational exuberance in the late 1990s).

▪️ High inflation can lead to central banks raising interest rates, which can, in turn, depress economic activity and lead to a recession (happening now around the world).

▪️ Deflation in prices and wages can trigger a deflationary spiral, causing reduced spending and harming the economy (Japan's experience in the 1990s).