What is the reason behind recession?

Recessions are characterized by a significant decline in economic activity, often measured by gross domestic product (GDP), employment, and trade. There are a number of factors that can contribute to a recession, including:

  1. Overheated economy: An economy that is growing too quickly can become unsustainable and eventually lead to a recession.
  2. Financial imbalances: A bubble in asset prices, such as housing or stock prices, can lead to a recession if the bubble bursts.
  3. Tight monetary policy: If the central bank raises interest rates too quickly or too high, it can slow economic growth and lead to a recession.
  4. External shocks: Events such as wars, natural disasters, or pandemics can have a negative impact on economic activity and lead to a recession.

It is important to note that recessions are a normal part of the economic cycle and that they can be triggered by a variety of factors. It is not always possible to predict when a recession will occur, and it is important to be prepared and have a diversified investment portfolio to weather economic downturns.