What is recession and what are the effects of it? Ever since the 2008 financial meltdown often we have been hearing the term recession almost everywhere, be it on the radio, Television or in the news channels of even in the print media. It has become a hot topic of discussion wherever we go. So what exactly is recession? We should try to know a bit more of it before we actually find out the effect of recession on the society as a whole.
In simple terms, recession means a situation where the GDP (gross domestic product) of a nation comes down in comparison to the previous years. For example, if the GDP of a particular country was say 100 billion US dollars, in the previous year and if it comes down to 98 billion dollars this current fiscal and there is a negative growth which could be attributed to recession. Recession simply means shrinkage of the economy in comparison to what it was over a period of time under comparison.
So, what are the effects of recession on the society? The first thing which a recession causes is a big shortage of credit for finance in the market. Banks would not like to lend money to people who need because they themselves are facing a credit crunch and they do not have enough money to lend to the economy and other business entrepreneurs, which brings down the business activities to a much lower level. As a result, people have been cutting back on a lot of things, availing of things like new Direct TV packages that enable them to have more savings.
Once there is a lesser availability of finance, many companies would be forced to close their establishments which would result in a lot of unemployment. This unemployment has a cascading effect and results in falling house prices, which indicates recession.