Economic Recession

Economic Recession is a period of decline in GDP of an economy. The National Bureau of Economic Research (National Bureau of Economic Research) of the United States considers any recession continued decline in economic activity for two or more consecutive quarters. Cut to the year 2008-09 — the US once again witnessed a severe downturn which created ripples across the world. Almost all sectors bore the brunt of this slump. If you are curious to know what factors lead to the recession in all its formidability, you are on the right page. A recession is when there is a decline in a country’s ‘gross domestic product’ (GDP) for two or more consecutive quarters of a year. This happens mainly when there is an imbalance in the demand and supply of commodities and services and their prices. However, it can also happen because of other reasons as well. Scroll down to know more on what makes an economy plummet into the downward spiral of recession.

Causes Of Economic Recession

Overproduction 

The market can at times be flooded with products which can cause an excess supply as compared to the demand of goods and services thereby leading to overproduction. People start losing interest in buying and as a result profits of companies decrease. Companies are forced to increase their rates and this causes recession as once companies increase prices, consumers tend to lose confidence and decide to decrease or stop spending completely.

Overconsumption 

With more buying power, people tend to spend more than what is required. A country also at times spends excessively for various things such as infrastructure and defense. This increased outlay for consumption purposes can contribute to debt. A case in point is the US which is spending billions of dollars in wars happening in Iraq and Afghanistan. Economists are worried that this can land Americans in heavy debts and eventually bankrupt them leading to another huge depression.

Shrinking Investment 

Investment is an...