Recession

  Recession: 

A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. A recession is also preceded by several quarters of slowing down. 

causes: 

An economy which grows over a period of time tends to slow down the growth as a part of the normal economic cycle. An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. 

A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. 

This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. 

Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. 

Stock markets & recession :

The economy and the stock market are closely related. The stock markets reflect the buoyancy of the economy.

The Sensex crashed by nearly 13 per cent in just two trading sessions in January. The markets bounced back after the US Fed cut interest rates. However, stock prices are now at a low in India with little cheer coming to investors. 

How to fight recession 

Tax cuts are the first step that a government fighting recessionary trends or a full-fledged recession proposes to do. In the current case, the Bush government has proposed a $150-billion bailout package in tax cuts. 

The government also hikes its spending to create more jobs and boost the manufacturing and services sectors and to prop up the economy. The government also takes steps to help the private sector come out of the crisis.