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    Thread: What is an economic crisis?

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      Default What is an economic crisis?

      What is an economic crisis?


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      An economic crisis is a process of deterioration of economic conditions which leads to changes in the overall conditions in one particular country. The specific features of the economic crises are:
      a fall in the manufacturing output
      a rise in unemployment
      bankruptcy of businesses
      a break of business ties
      a fall in the capital investments
      a decline in demand and depreciation of raw materials.

      During a crisis, it becomes more difficult to sell manufactured goods which leads to a fall in production volumes. In its turn, it results in a fall of employment. The labor market includes not only those people who lose jobs, but also those who graduate and need to practice their skills. Thus, if young specialists do not find job in due time, they risk to lose their skills.

      Economic crises in developed and developing countries have some differences and similarities. Let us take as an example the economic crisis that broke out in 2008 in such developed countries as the United States, Japan, the United Kingdom, Germany and France. Besides, this crisis also affected the economies of developing countries such as Russia, Ukraine, Belarus and Kazakhstan.

      The peak of the crisis was in 2009 when the production volume in developed countries decreased significantly. As for the developing countries, the output fell in Russia and Ukraine as well. In Belarus and Kazakhstan the GDP growth rate decelerated. After that, a recovery of production was seen in all countries (see the tables 1 and 2).

      Table 1. GDP growth rate in developed countries

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      (Source: based on the IMF data)

      Table 2. GDP growth rate in developing countries

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      (Source: based on the IMF data)

      In the period of an economic crisis, revenues of companies decrease as the demand for manufactured good is low. Besides, some companies become unable to pay their debts, which can lead to bankruptcy. Consequently, during a crisis the number of jobless people increases (see the tables 3 and 4). The unemployment rate rose in both developed and developing countries excluding Ukraine and Kazakhstan which tried to preserve jobs.

      Table 3. Unemployment rate in developed countries

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      (Source: based on the IMF data)

      Table 4. Unemployment rate in developing countries

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      (Source: based on the data from statistical periodical “Belarus and countries of the world”, published in Minsk in 2014.)


      One more outstanding feature of a crisis is depreciation of a national currency (see the tables 5 and 6). However, the exchange rate of the US dollar increased during that period.


      Table 5. Exchange rates of national currencies of developed countries

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      Economic crisis is a situation whereby the economy of a nation experience downturn cause by financial crisis an economy experiencing crisis will most certainly have :

      1. A FALL IN GDP

      2 DRYING UP OF LIQUIDITY

      3. RISING/FALLING PRICES DUE TO INFLATION/DEFLATION.

      A good example the crisis in the GREEK economy was caused by structural weakness in the economy and the revelation that previous data on government debt was under reported,this led to crisis of confidence ,indicated by the widening of spread bonds and rising cost of risks insurance on credit default swaps. A prolonged economic crisis can take the form of a recession.

      CAUSES OF ECONOMIC CRISIS.

      An economic crisis can occur either by mismanagement or by accident,it occurs when an external force like war or terrorism act on the country and creates significant impact,it can also occur if the leaders if the country are not responsible.


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      What will happen if the economic crisis happen in our life is increased unemployment, many businessman or factory bankrupt, business breakups, falling supply and demand. The economic crisis is a collapse of the overall economic condition that causes a significant change overall to a particular company, individual or country. Some of the triggers of the economic crisis can occur for cause and effect, if not addressed immediately will make their economic collapse. Need experts who can fix or prevent economic crisis, at least a massive change.


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      The economic crisis is a term used in the economic field and refers to a drastic change in the economy. Such rapid economic changes lead to a decline in the exchange rate of currency and higher prices of basic necessities. Economic crisis can hit a country if the economic changes can not be dammed again.
      Most economic actors consider the value of the weak currency, uncontrolled inflation and rising interest rates in banks is an indicator of the crisis, stock investors assume the decline in global stock index is an indicator of the onset of the crisis, while some economists consider the economic crisis occurs when growth conditions the domestic economy (GDP) grew negative for 2 consecutive quarters while the state debt grew.
      the company will not increase the debt if it does not produce greater productivity and profit. Therefore, the government should pay attention to the country's increasing debt over the past three years. In the event of a default, it can lead to a systemic crisis.


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      An economic want happen for several reasons, it could be that there is high level of money laundering which had practically reduced the amount that is meant for the progress and development of the country at large or it could be that some key government officials that have been appointed to handle the economy are not efficient in the discharge of their duty, thus there will be a problem that will generally affect everyone that lives in that country. Another thing that could lead to an economic crisis is when there is social unrest or in worse case scenario a war, take a country like Syria for instance, we see that the war that had been going on there had literally made that place to be in rumbles, that is the worse situation that can befall a country, I don't think those people will be thinking about money but survival at this stage of their existence.


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      Economic crisis of a country depends with many things.when a country face some problem that goes against his policy specially on economy then it called economic crisis.it can be many ways such as unemployment problem,devaluation of money, business problem, government change , election, world harassment etc.i think the most important economic crisis happened when a country face war.in this time normal work hamper ,people can not earning and it falls impact on countries economy.but we need to mind economic crisis very common problem for all country. Most of the county face such problem.who can control this situation very well they goes very well.if one country want to avoid it they have to make good policy for his country.otherwise they can not avoid it.


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      The monetary crisis that hit Asia in 1998 left the notion that economic collapse occurs on a seasonal basis. Naturally, 10 years later, the economic crisis re-occur. In fact, when it involves almost the big countries in the world. Reflecting from there, then developed the myth that the world economic crisis occurs often 10 years. Some claim the economic crisis occurs every 30 years. However, at present, the economic crisis can be caused by systemic impacts from other countries, including the impact of political policies taken by a handful of countries.
      Take for example the policies of US President Donald Trump in launching a trade war at this time could certainly impact the economic crisis if not brokered as soon as possible. Hence, he argues, the economic cycle is completely unpredictable. In fact, this can not be predicted with sophisticated economic models through any econometric approach.


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      A time may come in an organization or a country whereby there will come in a slowdown in the economic activities and these may be characterized mainly by declining in productivity and devaluing of financial institutions such as banks etc. this is referred to as an economic crisis.
      It is also caused by reckless money lending which in most cases are unsustainable. His is a common occurrence all around because dealing with finance by businessmen and the government has proved to be a very sensitive issue.
      When this sets in the institutions involved or even the government may end up not having any serious activity going on and there may be a need to seek external aid one way or the other in order to avoid total collapse.


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      An economic crisis is a situation where a country's economy sinks due to a major financial instability. An economic crisis can be identified by a tumbling Gross Domestic Product, lack of liquidity and inflation/deflation which causes rising and falling prices and banking failures, unemployment, and stock market crashes. An economic crisis can lead to recession or depression. It is a medium to large market downturn. There is little financial movement and companies experience loss of sales, and unemployment increases. It is mainly identified by unemployment, low prices, and low levels of trade and investment.


      Economic crisis is related to financial crisis. A financial crisis occurs because of falling values of finacial assests. Financial crisis can be associated with banking panics, stock market crashes, bursting of financial bubbles, currency crisis, and sovereign defaults. An economic crisis is an overrall downfall in the economy that affects all economic activities. Other crisis, in addition to economic crisis, include banking crisis, currency crisis, and speculative bubbles and crashes.


      The United States has an economic crisis about every ten years. Some of them include the 2008 financial crisis, the 9/11 attacks, the 1989 Savings and Loan Crisis, 1981 Recession, 1970 Stagflation, and the Great Depression of 1929. The economic crisis of 2008 was considered to be the worst crisis since the Great Depression. The crisis was followed by a global economic downturn and the great recession. The next economic crisis is predicted to occur in 2018 to 2020. It is predicted that the cause of the crisis is the the United States mortgage market selling subprime mortgages to large numbers of buyers and consumers with small incomes. The mortgages were made into securitized paper investments and sold globally to popular financial institutions. This traumatized the U.S economy and the gobal economy. In addition, the news of the economic crisis had everyone working the stock market in a panic to sell their stocks before the decline.


      An economic crisis can drastically effect the economy. It can effect free trade. Free trade is when countries import and export goods without the government being involved. Economic crisis can create difficult free trade practices. They can increase involvement in national and international governments.
      There are many ways in which an economic crisis can affect free trade. This includes protectionism, lower consumer demand, fewer expanding markets, reduced credits, and currency fluctuations.


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