Question

Draft one original post outlining your thoughts:

What causes recessions? What IS a recession? How do countries recover? What is the long term impact?

Answer 1

Recession is nothing but a situation when the demand in the market is very low. At the time of recession the business sentiments are down and investment falls due to that the employment level is low in the economy and hence the income of the people and demand falls. Leading to a very less economic activity in the market.

Recession is a time period in the business cycle when the economic activity is low in the market. Unemployment is high and demand is falling.

Countries use expansionary monetary and fiscal policy to overcome the recession. They increase the money supply in the market to keep the interest rate down and that increase the investment in the market. Creating more jobs and increasing the income or they can use expansionary fiscal policy where the government will increase the expenditure and that will lead to a higher demand in the market.

In the long term the demand will pick up and the economic activity will rise but the price will be much lower as compared to the level before the recession.