Rise in the period of economic recovery. The concept of the economic cycle and its phase

Let's look at the economic cycle, the concept of phase, the causes and types of emerging accommodations in economic life. This all will allow us to judge qualitatively the processes taking place in the country, the world or a single industry.

general information

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

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

They are interrelated and flowing from one another. Thus, during the economic recovery period, the foundation of excessive consumption is laid, which subsequently leads to oversaturation of the market and a reduction in the volume of work 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 examined separately with an indication of their interrelationship.

Revitalization and recovery

The capital accumulated, the created enterprises expand until the moment of work at their full capacity. At the same time, the employment rate rises to the maximum possible. This is accompanied by an increase in wages and prices. The former, as a rule, outperform the latter. In the period of economic recovery, the output is on the level of the pre-crisis period. As a rule, they believe that for the revival phase there is no increase in more than three percent of the gross domestic product for the year.

The reasons for the classification of revival as an upswing can serve as a set of facts:

1. The growth of gross domestic product is more than three percent per year.
2. New enterprises are actively created and put into operation.
3. Wages are growing.
4. Unemployment is falling.
5. The level of investment is growing.

Then there is the effect of a snow avalanche. Production is rapidly expanding, which entails an increase in demand for loans. Interest rates are increasing to the size of the average rate of return. During the economic revival period, one can observe the highest level of economic activity in the country. It is at this time that the main accumulation of the population is formed. In the period of economic recovery, the volume and amount of transactions at their real value are the highest.

Boom

When in the period of economic recovery the greatest employment is achieved, the industry operates at maximum capacity, then the growth of business activity stops. This is the next phase of the boom, in which the highest social parameters are observed. The peculiarity of this stage is that the disproportions that are still being managed to be extinguished due to accumulated reserves are beginning to be formed. The emergence of the problem of cyclical development of the economy is closely connected with the mechanism of self-regulation. The 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 eventually we would enter a phase of humanity in which there would be no such recessions and growths.

Negative trends are also exacerbated by the economic sector, which has not yet figured out what the situation has been. Initially, business entities try to solve problems through price changes, ultimately causing, as a rule, only inflation.

Recession

In a period of economic recovery, people can feel that their lives are getting better. But to use all the possibilities at once is not recommended because of the subsequent crisis phenomena. So, there is a process of overaccumulation of capital, there are excess capacity, commodity stocks grow, capital turnover slows down. From this comes a logical result - the incomes of enterprises and, accordingly, their employees and owners fall. This, in turn, leads to a reduction in aggregate demand for investment and all the resulting services and goods. In the final analysis, the growth in the value of the gross national product is observed .

As a result, a large number of negative trends arise: the stock price is falling, unemployment is growing and all this is accompanied by a decrease in the overall standard of living. And this often develops to such forms that not only the GDP growth decreases, but the indicator itself becomes smaller. During the recession, production is steadily declining and the unemployment rate is increasing. At the same time, the incomes of the population are declining. Through the action of the ratchet, prices do not immediately fall under the trend. Their decrease occurs only in case of an exacerbation and duration of the situation, which may serve as a phase of depression. But in this there are also relative advantages. So, the means of production and labor become cheaper, which creates the prerequisites for new investments in the economy (companies, technologies, equipment and personnel).

Depression

This is the lowest point of any business cycle. Characteristic for depression is the cessation of the process of recession. But you can still see a high level of unemployment. True, if there is no significant inflation, the loan interest rate falls . This, in turn, stimulates demand for money capital, creating the prerequisites for the accumulation of this.

Conclusion

After depression, there is always a new phase - ascent. Investments, demand begin to grow, the unemployment rate decreases, the banking sector becomes more active. The logical conclusion 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's clear that the economy has not been able to fully recover in such a short period of time. But if we compare the current situation with the one that was in the year 1800, the result will be visible.