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Stress is caused by your perception of situations around you and then the reaction of your body to them. The automatic stress response to unexpected events is known as 'fight or flight'. Discovered by Walter Cannon in 1932, it is the release of hormones to help an organism survive in response to a shock or perceived threat. The increased heart rate, blood pressure, sweating, and diversion of blood to the core of our bodies makes our muscles more efficient, allowing us to escape the threat.
In the modern world, threats do not require such a physical response, so stress just causes us to become excitable, anxious, jumpy and irritable, which negatively affects our ability to work effectively.
The long term effect of these physical changes are damaging to your body, and are linked with a range of condition from allergies and diabetes to depression and heart disease, affecting all the systems within your body. In extreme cases, stress can cause psychological problems such as Post Traumatic Stress Disorder or Cumulative Stress Disorder.
Source; adapted from Stress Management Society