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Recession can be defined as the decline in the performance of an economy. It is accompanied by the fall in the level of commodities in the market and the reduction of jobs. Studies show that depression is the worse form of recession due to prolonged period that results in the fall in the value of Gross Domestic Product (Nancy 2009).


Inflation is the major cause of recession bringing about the increase in the price of basic commodities and services to an extent that the citizens cannot afford them. Increased inflation means that there is very little money chasing a few goods and a result few goods are bought from the market (Nancy 2009). This is mainly attributed by high manufacturing cost of goods, escalating prices of energy and a country being in a debt. When costs of commodities continue to rise, individuals minimize their spending habits (Nancy 2009). They spend for basic needs at the expense of luxuries and eventually they save that money. This leads to gross domestic product going down as the end result. When this happens the manufacturing organizations minimize cost and they sack employees leading to joblessness (Winfrey 2008).

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Recession comes with very severe impacts thus leading to eruption of chaos in the system of a country's economy. Much as inflation is the cause of recession it is strange to note it is an aftermath of recession (Winfrey 2008). When people reduce the spending behavior, it is because prices have shot up and this leaves inflation as the one of the effects brought by recession (Nancy, 2009). Another effect is reduced salaries forcing people to stop spending. The result is minimized income bringing very little profit to investors. Another effect is increased interest rates for those who have taken loans (Winfrey, 2008). This is usually done to recover from the losses suffered over period of recession. Finally, many citizens are left jobless because organizations experiencing losses and are to reduce the number of employees so that they can be able to keep them (Winfrey, 2008).

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