There is fear in the mind of people about the coronavirus pandemic causing a huge recession in the world’ economy, at this point we are already noticing that some economies are greatly collapsing but we cannot say for sure if the economic collapse is going to be worse than that of the great depression or there is going to be a miracle that will change the situation.
I like to learn about history a little bit so I did a little research to learn about how this issue of recession came into the picture in the first place, but before then I will like to know what recession is about: Recession occurs when there is a difference in the level of supply as well as demand.
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).
An increase in the price of goods which is a decrease in the value of cash at hand is known as inflation and inflation can lead to recession if the demand is not equal to the amount of good made available, but the economy is still good if the amount of the goods produced is equal to the amount demanded even at a high price.
The interest rate offered on loans by financial institutions also has a way to either grow the economy or make it collapse, when the interest rates on loans are low, it makes companies and various businesses want to borrow more money to run the business and the economy smiles at times like that but once the interest rate on loans increases, it becomes scary to borrow and this reduces the number of goods produced which in turn makes the little product available very expensive.
Causes of the Recession.
###Natural Disasters.
Natural disasters like an earthquake will destroy some infrastructural facilities which makes the process of production a little bit difficult or reduced in quantity and the outcome of this production issue is that those commodities become very difficult to afford and this activity in the long run produces recession.
Slow economic growth
Companies that borrow money with the hope that the economy will grow back soon and they will be able to make more profit and even pay back the loan borrowed may get disappointed by the slow growth in the economy which then brings the company into bigger problems and slowing down the production process, this is a recession calling fast.
Great availability of cash as a result of recession.
Just like what the government of most countries did when there was an outbreak of covid-19 by printing money for their citizens to spend, this attitude could bring about recession in time to come by the time there is so much money in the economy.