Question

6. How can the closing of businesses lead to a recession?

Answer 1

Answer:

Remember:

• The economy runs on money and doesn't like uncertainty

• A recession is when the economy takes a really big hit
• When a business closes - especially a big one - money is lost

When a business closes, consumers have to spend their money in a different sector, or they end up saving what they were expected to spend. This causes a fluctuation in the markets, something the economy doesn't like. For example, right now, many businesses are temporarily shutting down, while others are closing permanently. This has caused the economy to spiral downhill because the money flow has changed. People are no longer spending money on things like entertainment, and are instead stocking up on essentials. However, other people can't pay their staff's wages and are considering closing their businesses. When one business closes, the workers aren't getting paid, the consumers aren't spending money, and the economy get's nervous. I hope this makes sense :)