Compare and contrast inflation and recession. how do inflation and recession influence your financial decisions?

Inflation is defined as the rate at which the general level of prices for goods and services is rising which results to the falling of the purchasing power of currency.

Recession is defined as the period when businesses cease to expand, the GDP diminishes for two consecutive quarters, the rate of unemployment rises and housing prices decline. 

Inflation is a major cause of recession. Because of this, people tend to hold on to their money instead of buying things they want. They only buy essential items that satisfies their most basic needs because their money supply is limited and their purchasing power is diminishing. 

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