How Economic Crisis Affects Our Economy in Becoming Boom to Bust!


Does my business grow? How can I afford my own house? Do I get a good job? Will I be able to pay my debts? All these are small questions we often ask ourselves and discuss in our family. Our lifestyle and businesses totally depend on our Economy. If our economy is growing and in a good stage of the economic cycle there are many chances for a businessman to grow his business and for a common man to earn his livelihood as the prices are not so high and there are many producers ready to fulfill our demand. For maintaining our economy regular meetings are being conducted by the government. IMF i.e "INTERNATIONAL MONETARY FUND" has a major role in the world economic outlook. According to IMF's recent report, our global growth is 4.9% which is 1.9% below from April 2020. The reason behind this low global growth is the COVID-19 pandemic. Every country is facing an economic crisis issue. Many countries are still in lockdown from March 2020. This lockdown has brought the countries economy in the recession period. If the coronavirus cases are not stopped our economy has to suffer a lot.

What is the Economic Crisis?

The economic crisis means a downfall in a countries economy due to the fall in GDP, property prices fall, Unemployment increases, at this point the country can face the problem of recession or depression.

Effects of Economic Crisis

* Increase in Unemployment
* Rise in Poverty
* Fall in the prices of Property
* Income Reduces
* Less collection of Tax Revenue
* Businesses gets Closed
* Inequality will be Increased
* Borrowings of Government increases

Factors of Economic Crisis

* Unemployment
Unemployment can be a cause and also a result of the economic crisis. During crisis interest rates gets high which decreases consumer spending, as a result, the companies can't afford more employees which causes unemployment

* Natural Disaster
Our nature can be a factor of an economic crisis. Floods, crop diseases, hurricanes can impact on our crops, and due to shortage of food price increases.

* Diseases
Diseases can be a reason for the economic crisis. As of today, COVID-19 pandemic has become a reason for recession all over the world

* Bank Lending Policies
When the economy is growing banks give loans on lower rates but as the economy slows down the lending rates of banks also increases which causes a factor of economic crisis.

How to Solve the Problem of Economic Crisis

* Fiscal policy
Fiscal policy is related to taxation, which the government collects from the public for there expenditure. The government should reduce the rates of taxes so that the public can pay easily. In this way, the flow of money increases in the hands of the government.

* Monetary Policy
Monetary policy is related to Money. The flow of money should be increased in the economy to fight with the problem of economic crisis. Reserve bank increases the supply and demand of money by reducing interest rates, prints money, buy bonds, quantitative easing, etc.

* Government Bailout
The government should give assistance to failing industries and banks to prevent the confidence of running the business.

* Proper Support by IMF
IMF should support by giving the money to the government so that the confidence of the government should not reduce in dealing with the economic crisis.

* Government spending on long-term policies
Long-term policies improve efficiency in the economy. By lowering taxes and spending on education and training, so that our new generation should not be affected by the economic crisis. Our new generation is the future of Our country.

Different Stages of Economic Life Cycle

1) Expansion
It's the first stage of the economy. At this point, the economy grows faster, maximum production, and lower interest rates.

2) Peak/Maturity
When an economy gets maximum profits from every business by which the supply of money also increases. From little production, maximum profits are earned.  When there is more money the value of money decreases, which imbalances the economy.

3) Contraction
When an economy imbalances from maximum profits stage of contraction occurs. At this stage unemployment increases, slow growth, economic stagnation occurs.

4) Trough
This is the last stage of the economic cycle. The point at which the economy is low and after which the recovery stage begins.

The Bottom Line

An economic crisis is a situation in which the economy hits a low point. The recovery from this situation is possible when the government and the citizens of that country join hands so that the flow of money increases in the economy. There are many economic crisis that occurred in our past years from which the government of that country has recovered in a smart way.

"BOOM and BUST" is a part of our economy.
Powered by Blogger.