The rise in the period of economic recovery. The concept of the economic cycle and its phases

Let's analyze the economic cycle, the conceptphases, causes and types of occurrences in economic life. All this will allow to judge qualitatively the processes occurring in the country, the world or an individual industry.

general information

In classical science, the economic cycle is divided into four phases:

1. Revitalization and recovery.
2. Boom.
3. Recession.
4. Depression.

Они являются взаимосвязанными и вытекающими один from another. Thus, during the period of economic recovery, the foundation of excessive consumption is laid, which subsequently leads to a glut of the market and a reduction in the workload of enterprises and the dismissal of some employees. Therefore, in order to analyze in detail the concept of the economic cycle and its phases, all stages will be considered separately with an indication of their interrelation.

Revitalization and recovery

Accumulates capital generated by productionexpand to the point of operation at its full capacity. At the same time, the level of employment rises to the maximum possible. This is accompanied by an increase in wages and prices. The former, as a rule, are ahead of the latter. During the period of economic recovery, the indicators are reaching the level of the pre-crisis period. As a rule, it is considered that the growth phase is not characterized by a growth of more than three percent of gross domestic product per year.

The reasons for classifying recovery as recovery can be this set of facts:

1. Gross domestic product growth is more than three percent per year.
2. New enterprises are being actively created and put into operation.
3. Growing wages.
4. Reduced unemployment.
5. The level of investment is growing.

This is where the avalanche effect appears.Production is expanding rapidly, which entails an increase in demand for loans. Interest rates are rising to the size of the average rate of return. During the period of economic recovery, one can observe the highest level of economic activity in the country. It was at this time that the main savings of the population are formed. During the period of economic recovery, the volume and amount of transactions in their real value are the highest.

Boom

When in a period of economic recovery is achievedthe largest employment, the industry operates at maximum capacity, then the growth of business activity stops. This is the next boom phase, at which the highest parameters of society are observed. The peculiarity of this stage is that disproportions begin to form, which are still being managed to be extinguished at the expense of previously accumulated reserves. The emergence of the problem of cyclical development of the economy is closely linked to the mechanism of self-regulation. A crisis is only a structural factor in the renewal of the economy. If the population of the Earth were stable, with the same needs, then over time we would enter the phase of humanity, in which such recessions and growths would not be fixed.

Негативные тенденции также усиливает и the economic sector, which has not yet figured out what the situation is. Initially, business entities try to solve problems by changing prices, ultimately causing, as a rule, only inflation.

Recession

В период оживления экономики люди могут ощущать, that their life is getting better. But to use all the possibilities at once is not recommended due to the subsequent crisis. So, there is a process of capital accumulation, there are excess capacity, rising inventories, slowing down the turnover of capital. A natural result comes out of this - the incomes of enterprises and, accordingly, their employees and owners fall. This, in turn, leads to a decrease in the aggregate demand for investments and all the services and goods arising from them. Ultimately, there is a drop in the growth of the gross national product.

As a result, a large number ofnegative trends: the stock price falls, unemployment rises and all this is accompanied by a decrease in the general standard of living. Moreover, this often develops to such forms that not only does GDP growth decrease, but the indicator itself becomes smaller. During a recession, production is continually declining and unemployment is rising. At the same time incomes of the population decrease. Through the action of the ratchet effect, prices do not immediately fall under the trend. Their decrease occurs only in the case of aggravation and duration of the situation, which can serve as a phase of depression. But there are also relative advantages. Thus, the means of production and labor become cheaper, which creates prerequisites for new investments in the economy (companies, technologies, equipment and personnel).

Depression

Это нижняя точка любого экономического цикла.Characteristic of depression is the cessation of the recession process. But you can still see high unemployment. True, if there is no significant inflation, the rate of loan interest decreases. This, in turn, stimulates the demand for money capital, creating the prerequisites for its accumulation.

Conclusion

After depression, there is always a new phase -rise. Investment, demand, start to grow, unemployment is falling, the banking sector is becoming more active. The logical end of this process is a boom, during which the volume of production exceeds the level that was before the crisis. It all depends on what time frame is taken. So, if we compare the crises of 2008 and 2014, then it is clear that the economy could not fully recover in such a short period of time. But if we compare the current situation with the one that was in 1800, the result will be visible there.