Phases of the economic cycle and their description

The economy of all countries in the world is developing unevenly. In it there are constant changes, alternating economic cycles and crises. If they are depicted as a graph, you can see that the processes occurring at the macroeconomic level can be displayed in the form of wave-like segments. Consider what the economic cycle and its phases are.

The economic cycle is the period between two higher or lower points on the chart. There are the following phases of the economic cycle: crisis, depression, recovery and recovery.

1. The crisis is characterized by the following economic situation. There are much more bankruptcies of firms. They can not sell goods accumulated in warehouses, so the liquidity of enterprises falls sharply, and hence, solvency. There is no way to pay off bills with suppliers, employees, tax authorities, etc. As a result, the bankruptcy of each enterprise has an impact on the whole environment. Suppliers do not receive payment for shipped materials, which increases their costs and can also lead to bankruptcy. Workers do not receive their wages, which significantly reduces their quality of life. They can not buy new products, trade enterprises suffer. In the event of bankruptcy, all employees of the enterprise are reduced, resulting in an increase in unemployment. Other negative manifestations in the country's economy: massive non-payments for loans, mortgages, a significant drop in the price of securities, liquidation of many credit institutions. Thus, during the crisis everyone suffers, the negative economic situation affects every area of activity.
2. Depression is the phase following the crisis. At this point, the decline in production is suspended. Prices for goods reach their minimum. Consumers are gradually buying up stocks stored in the warehouses of the enterprise. In this way money capital appears again. During the depression, there is a minimum for such indicators as the bank interest rate, the level of trade margins, and so on. Unemployment reaches its maximum value. A vivid example of this cycle may be the depression of the 30s of the 20th century, when millions of people lost their jobs in America, tens of thousands of businesses went bankrupt, including very large ones. People took on any work to support their family and pay for mortgages, as they could be on the street at any time.
3. Revitalization - this is the negative phase of the economic cycle ends. Now the production is starting to gain momentum again. Warehouses are filled with goods. This is necessary to ensure the uninterrupted supply of products on the market. As production has revived, new jobs appear, which means that the unemployment rate is declining . The quality of life is significantly increased, and prices are starting to rise again. There is an increase in demand for goods of different price categories. People are increasingly beginning to give preference to luxury products. There are new enterprises, investors are willingly investing their money in gold, securities, etc. There is a real flowering of the country's economy.
4. Climb. These are all positive phases of the business cycle. Enterprises produce products in the volumes that were in the pre-crisis period. Unemployment reaches a minimum. The quality of life of most of the population is high, which enables traders to make a large mark-up on their goods. And at the same time, there is no drop in demand for their products.

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