What happens in a recession?

There are many consequences of recession. Some of them are cutting back on investments by the private sector. To stimulate economic growth, the Central Banks may try to cut the interest rates. Due to lower demand the asset prices of housing and shares will fall. Due to lower demand in the economy, the inflation rate may come down. You can read about the Inflation in Economy- Types of Inflation, Inflation Remedies [UPSC Notes] in the given link.

Due to lower demand, the output in the economy will fall, which will result in lower revenues and profits for companies. This will lead to laying off workers thereby leading to increase in unemployment rates.

Further readings:

  1. Inflation Targeting: Methods, Drawbacks and Benefits
  2. Consumer Price Index (CPI) – CPI and its Types [USPC Indian Economy Notes]

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