This millennium has faced one of the worst global recession in 2008 and is likely to face another in the coming months. A search on recession would fetch us this, "recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP (Gross domestic product) in two successive quarters." Some of you might wonder, "what are these things?" keep reading to know better.
A recession may happen for a number of reasons like improper management, high-level ethical breaches, a natural disaster, a disease, a war, et cetera. During a period of recession, the following things might happen: people losing jobs, inflation, deflation, and famine.
People work and get a salary or profit. This salary or profit is known as nominal income. But, the subtraction of money needed for essential goods from the nominal income results in the real income. This real income is the true measure of a country's prosperity and a stable economy.
The ability of the people to purchase goods with a single unit of currency is known as purchasing power. This purchasing power decides if there is inflation or deflation in the economy. For example, a kilogram of onion costs 35 rupees in March. But in December, a kilogram of onion costs 80 rupees. Here the purchasing power is reduced and has resulted in inflation. Inflation is a considerable increase in the prices of goods relative to the value of money. Deflation is the opposite where the purchasing power is increased and people can buy more than yesterday or last month with the same amount of money.
During a recession, governments may print more money in order to produce circulation and this might lead to inflation. That's why a central banking system controls the printing of money. In India, that system is the RBI (Reserve Bank of India). The world bank has certain terms and conditions to control the printing of money.
A recession affects people psychologically more than economically. Stock prices fall drastically and hopes fly away in the air. To know more about the stock market, wait until tomorrow.
A recession may happen for a number of reasons like improper management, high-level ethical breaches, a natural disaster, a disease, a war, et cetera. During a period of recession, the following things might happen: people losing jobs, inflation, deflation, and famine.
People work and get a salary or profit. This salary or profit is known as nominal income. But, the subtraction of money needed for essential goods from the nominal income results in the real income. This real income is the true measure of a country's prosperity and a stable economy.
The ability of the people to purchase goods with a single unit of currency is known as purchasing power. This purchasing power decides if there is inflation or deflation in the economy. For example, a kilogram of onion costs 35 rupees in March. But in December, a kilogram of onion costs 80 rupees. Here the purchasing power is reduced and has resulted in inflation. Inflation is a considerable increase in the prices of goods relative to the value of money. Deflation is the opposite where the purchasing power is increased and people can buy more than yesterday or last month with the same amount of money.
During a recession, governments may print more money in order to produce circulation and this might lead to inflation. That's why a central banking system controls the printing of money. In India, that system is the RBI (Reserve Bank of India). The world bank has certain terms and conditions to control the printing of money.
A recession affects people psychologically more than economically. Stock prices fall drastically and hopes fly away in the air. To know more about the stock market, wait until tomorrow.
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