When the economic growth of a country slows down over two consecutive quarters, it may head into a recession. During this time, the GDP slows, incomes and profits fall and unemployment may rise. Governments may respond by decreasing taxes and providing stimulus. For business, the bottom line may be impacted and tough decisions including cuts to projects and making staff redundant need to be made.
For example…
The Global Financial Crisis of 2008 caused a recession in many economies. In the United Kingdom, banks lent out huge sums of money and benefitted from the interest charges. This put house prices up more than wages. These loans given out by banks eventually became unpayable. This led to a financial crisis after which banks refused to lend as a result the economy shrunk. This meant lower affordability and prices all round, ending up in a recession.
