Factors Influencing A Drop In The Economy

The economy of a country can depend on several factors, and the collapse in any one of its segment can result in the downfall of the economy of a government. Economic collapse can occur due to national or regional economic breakdown because of the instability of the economy for a long time. During this time, the country suffers social unrest, bankruptcies, trade loss, currency violation, and social chaos due to unavailability of resources. The government should identify the major causes of economic breakdown and work towards improving the solutions for such causes at a constant rate. Here are some of the reasons which cause a drop in the economy.

Unemployment

workers

Higher rates of unemployment in a country can become a major issue for the collapse in the economy. Unemployment occurs because the industries experience a huge loss due to less demand for the products and don’t require more workers. Due to fewer workers, the factories face incompetence in manufacturing their products, and the cycle continues. This might seem like a small issue but can affect the economy if the cycle continues for a long time, and it will be hard for the economy to recover back.

High Oil Prices

The oil industry is the most demanded industry in the world as oil is essential for the production processes for most of the products available in the market. If the oil prices rise at faster rates than the economic rise, it will only lead to more decline in the economy. The oil prices and economy should go hand in hand. High oil prices can cause inflation and lead to higher rates of unemployment, leading to economic decline.

Hyperinflation

Several factors result in hyperinflation. It occurs when the government allows the inflationary pressure to rise to print more money until they are unable to control it anymore. As the printing of currency goes out of control, the prices of products in the market will increase. As the prices for the commodities and service rise, and later, the government fails to maintain a balance between the capital and trades, hyperinflation occurs, which then forces the government to take debt from other countries. This is one of the major reasons which result in the downfall of the economy and is hard to gain back control over it.

Stock Market Crash

Stock Market Crash

When the investors face a tremendous loss in their invested market, they lose confidence in putting more money into the stocks. This results to a dramatic decline in the stock prices and overall brings down the value of the industries. The stock market crashed occur due to a prolonged increase in the stock values which makes it difficult for the market to find more investors as they don’t want to risk their money on such stocks at minimum profits.