Crisis as an economic phenomenon

Causes of crisis


Speaking about the causes of the crisis, most economists note a market imbalance. The supply of goods exceeds demand, people stop buying goods. Enterprises are forced to reduce the price of their products. The money raised no longer pays for production; as a result, entrepreneurs become bankrupt. Therefore, they often speak of a "crisis of overproduction". The decline in household incomes leads to an even greater decline in demand and causes a new wave of business closures and layoffs.
N.D. Kondratiev presented the development of the economy in the form of large cycles in which the crisis is only a natural part. The cycle consists of stages: the initial, when everything seems to be in order, - crisis - depression - economic recovery. These cycles are associated with the development of science and technology, which leads to the emergence of new industries that are beginning to develop rapidly. And the old industry in this fall into decay. With them, the crisis begins.Crises in the economy can also be associated with war, natural disasters, etc.

Types of crises


Economists talk about two types of crises - recession and depression. A recession is when a decrease in the level of production is observed in the economy, that is, a negative GDP, for at least six months. In this case, the fall does not reach its minimum.
Depression is a very strong, deep or prolonged recession, when the volume of production drops significantly and this state persists for a very long time, sometimes several years.
The Great Depression of the 1930s is a classic example of severe depression. Between 1929 and 1933, production in the United States fell by 30%. In 1933, about a quarter of the working population was unemployed. Firms were not able to sell their products, closed their factories and offices in large numbers.
The consequences of crises are very significant for the public life of countries. For example, because of the crisis, interest in religion is increasing, mortality from various diseases is increasing, the number of suicide cases is increasing, an increase in alcoholism is observed, and the population consuming cheap drinks.Growing crime. Sharply reduced tourism.
Crises heal the economy, destroying backward modes of production. And it is the crisis that is pushing people to search for new ways of doing business, which ultimately leads to an economic upturn.


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