How can a recession see a drop in profits and a rise in poverty? Where does all the money go, if not to the businesses or people?
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A recession can be caused by anticipation. What this means is if everyone started seeing news stories about how a recession is coming, they then start spending less of it in actual goods and services. They save more of their money in anticipation of a recession.
When people stop spending, companies will scale back production or in the case of tech firms which really don’t produce anything per se, they scale back employees as we recently saw.
This leads to a cycle that feeds upon itself. If employees make less money or get fired, they spend less money in the market of goods and services. If less money is spent on goods and services, firms continue to cut back on production and employment. If less people have jobs… you get the idea.
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