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Why Do Recessions Happen?

We hear the word recession all the time?  But what is it and why do recessions happen?  The impact of an economic recession is utterly wide-ranging. Depending on its nature and extent, a recession’s effects can be huge or minimal, direct or indirect. In any case, a recession is something that everyone should care to know about.

But in order to care about it, you must know what a recession is and why it happens.  According to the National Bureau of Economic Research (NBER) in the US, a recession refers to a considerable decline in economic activities happening at a wide scale, which lingers for several months and is visible in macroeconomic data such as national output, employment, and industrial production, among others.  Although the word recession gets thrown around a lot for periods of economic uncertainty or inactivity, it is often used by economists and business leaders to mean (at least) two consecutive quarters of GDP decline.  But enough with the technicalities, here are some of the reasons why recessions happen in the economy:

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