Economic recessions are caused by a decline in GDP growth, which is itself caused by a slowdown in manufacturing orders, falling housing prices and sales, and a drop-off in business investment. The result of this slowdown is falling employment, and rising unemployment, which causes a slowdown in retail sales. This creates a downward spiral in manufacturing and increased layoffs. A stock market decline, known as a bear market, can either be a result of a recession but is often a cause itself.
But what usually causes the slowdown in the first place? Each recession has its own specific causes, but all of them are usually preceded by a period of irrational exuberance. This is part of the expansion phase of the business cycle.
But what usually causes the slowdown in the first place? Each recession has its own specific causes, but all of them are usually preceded by a period of irrational exuberance. This is part of the expansion phase of the business cycle.