Cyclic development of the economy: main causes and consequences

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:54

The cyclic nature of the development of the economy is its objective characteristic, which is recognized by all modern economists. They believe that the market system simply cannot exist without experiencing ups and downs at certain points in time. The cyclical development of the economy is something that everyone has to reckon with, because it has a direct or indirect impact on all subjects: both individual households and the state as a whole. But what causes unexpected recessions and how to deal with them?

The cyclical development of a market economy is what representatives of the Soviet school often spoke about, advocating for an administrative-command way of managing the entire system. They argued that only centralized regulation could mitigate the effects of recessions and crises. Perhaps ittrue. But whether the command economy is experiencing a real recovery is a big question.

Most modern scientists agree that the cyclical development of the economy and the change in the phases of business activity is an objective reality that cannot be changed by a person. Just as one cannot learn anything without making mistakes, so the economy cannot move to a new stage of development without having survived the crisis. The cyclical development of the economy reflects the situation in which the system is out of balance in order to recover and appear updated. A crisis is the lower extreme of this growth cycle. There are several types of them:

1) K. Zhuglar (7-11 years old) - associated with fluctuations in investment investments in fixed assets;

2) J. Kitchin (2-4 years) - the reason for which lies in changes in world gold reserves;

3) N. Kondratiev (50-60 years old) - related to scientific and technological progress and its achievements.

Besides the crisis, there are three more phases that characterize the cyclical development of the economy: depression, recovery and recovery. They differ in such volume indicators as GDP (gross domestic product), GNP (gross national product) and ND (national income). The whole cycle breaks down into the following elements:

1) peak (the point at which production was at its maximum);

2) contraction (the period in which there is a gradual decrease in output);

3) bottom (the point that indicates the moment at which the release is minimal);

4)rise (period in which production is gradually improving).

The cyclical development of the economy can also be imagined by considering the alternation of the ascending and descending waves, which has a huge impact both on the entire economy and the country as a whole, and on individual economic entities. But it turns out that crises are also possible in a period characterized by a general revival or rise in the economy. These are the so-called intermediate crises, which are most often local in nature. They do not cover the entire economy as a whole, but separate branches or areas of economic activity. Structural and transformational crises are characterized by more severe consequences, which are much longer and affect the functioning of each individual entity.