What causes a recession?

raman   November 15, 2011   Comments Off on What causes a recession?

Recession is a stage in the economy when businesses stop growing and the GDP declines for at least two quarters consecutively.House prices fall and unemployment rises in this period.

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Recession is caused by many factors but the primary cause of recession is inflation. As the rate of inflation rises, the amount of goods or services that can be purchased with the same amount of money reduces. People start saving more and cut spending. This in turn prompts businesses to cut costs and lay off workers. These factors combine to cause a fall of the economy in recession.