The phases of the economic cycle and their description

economies around the world is developing unevenly.In it, there are constant changes, alternate economic cycles and crises.If they draw a graph, we can see that happening at the macro level processes can be displayed as a wavy line segments.Consider what the economic cycle and its phases.

economic cycle is a period between the two higher or lower points on the graph.The following phase of the economic cycle: the crisis, depression, recovery and growth.

  1. crisis characterized by the following economic situation.There is a much larger number of bankruptcies of companies.They can not sell the goods accumulated in the warehouses, so the liquidity of the companies falls sharply, and thus the ability to pay.There is no way to pay the bills to suppliers, employees, tax authorities, etc.As a result of the bankruptcy of each company has an impact on the whole environment.Suppliers do not receive payment for the shipped material, which increases their costs and could also lead to bankruptcy.The workers do not receive their wages, which significantly reduces their quality of life.They can not acquire new products, commercial enterprises suffer.In case of bankruptcy of the enterprise, all employees are shortened, so that there is an increase in unemployment.Other negative developments in the economy: massive defaults on loans, mortgages, a significant depreciation of the securities, the elimination of many lending institutions.Thus, while during the crisis affects everything, the negative economic situation affects every sphere of activity.
  2. Depression - phase following the crisis.At this point, the decline in production is suspended.Commodity prices are at their lowest.Consumers are gradually buying up stocks stored in the warehouses of the company.Thus, there is again money capital.During the depression, there is a minimum of indicators such as bank interest rate, the level of trade margins, etc.Unemployment reaches its maximum value.A striking example of this cycle can happen Depression 30-ies of the 20 th century, when in America, millions of people lost their jobs, tens of thousands of businesses have gone bankrupt, including very large.People took any job, to feed his family and pay the mortgage as may at any time be in the street.
  3. Revival - this negative phase of the economic cycle ends.Now, the production starts to grow again.Warehouses are filled with goods.This is necessary to ensure uninterrupted supplies to the market products.Since the production was revived, the new jobs, and therefore reduced the level of unemployment.Quality of life is significantly increased, and prices begin to rise again.There is increasing demand for products with different price categories.People are increasingly beginning to prefer luxury products.There are new companies, investors are eager to invest in gold, securities, etc.There is a real blossoming of the economy.
  4. rise.That's all the positive phase of the economic cycle.Companies manufacture products in the amounts that were before the crisis.Unemployment reaches a minimum value.Quality of life of most of the population is high, which allows traders to make a big mark-up on products.And while the fall in demand for their products does not occur.

We considered four main phases of the economic cycle.They are constantly repeated in the economy of each developing or developed country.