Recession is a period of economic slowdown that may lead to rising unemployment, decreased consumer spending and lower investment by businesses. This is a common part of the business cycle, and it usually lasts for several months to a few years. A recession is most likely caused by a dramatic decrease in demand for goods and services, such as when the price of oil or other raw materials spikes, making them less affordable.
In some cases, a recession can result from the burst of an asset bubble. This happens when the prices of assets like stocks or real estate get artificially inflated, stemming from overly optimistic expectations. When the bubble bursts, people lose money and confidence collapses. This causes spending to decline and companies to reduce growth plans.
When a recession does hit, it’s important to take a deep breath and remain calm. The good news is that recessions are typically short and come to a close quickly, making them a normal part of the business cycle.
It’s also important to make sure your credit is strong so you can still afford things like your mortgage or car payment if the economy worsens. During this time, it’s okay to prioritize your budget so that you are paying your essential bills and cutting back on non-essential expenses. If you can’t afford to pay your bills in full, consider contacting your lender and asking for a hardship application, which could help you avoid foreclosure or eviction while you wait out the downturn.
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