In News
- Recently, there are signs of economic weakness and inflation emerging in markets like the US raising the questions of recession.
About Recession
- Meaning:
- A recession is when the economy stops growing and starts shrinking.
- It means not only shrinking GDP but also declining incomes, employment, industrial production and retail sales.
- It happens when the value of goods and services produced in a country known as the gross domestic product declines for two consecutive quarters, or half a year.
- A recession ends when economic growth returns.
- Causes:
- Rising in unemployment.
- Rises in bankruptcies, defaults, or foreclosures.
- Falling interest rates.
- Lower consumer spending and consumer confidence.
- Falling asset prices, including the cost of homes and dips in the stock market.
- How to prevent it?
- It includes targeted tax cuts or spending increases on safety net programs like unemployment insurance that kick in automatically to stabilise the economy when it is underperforming.
- Approving new spending on infrastructure projects in order to stimulate the economy by adding jobs, increasing economic output and boosting productivity.
- In the prevailing market situation, hybrid funds are best placed to protect the downside for the investor.
- Avoid investing in property as builders and housing finance companies are luring buyers with big discounts and low loan rates.
- It is always a good idea to diversify the portfolio with Gold and Foreign reserves to reduce the risk.
- Create an emergency corpus while the jobs are vanishing.
Source: IE
