ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When demand peaks and starts to decline, the excessive supply of goods and services that aren’t consumed can lead to a recession, with companies producing less and downsizing while people lose purchasing power and consumption continues to fall.

Detailed explanation-2: -Contraction is the phase that can lead country economy into recession. Contraction phase is a term that is describing an economic phase, phase of a business cycle, when real GDP is falling.

Detailed explanation-3: -However, most recessions are caused by a complex combination of factors, including high interest rates, low consumer confidence, and stagnant wages or reduced real income in the labor market. Other examples of recession causes include bank runs and asset bubbles (see below for an explanation of these terms).

Detailed explanation-4: -Recessions are caused by a multitude of factors, with higher interest rates usually cited as the primary cause of a recession. At the moment, the market is also concerned with nonroutine events, such as the Russia-Ukraine war and its impact on energy and commodity prices, which have fed into higher inflation.