What Are the Factors That Lead to an Economic Crisis?
What is an economic crisis? Most of the time, we are only told that our country is suffering from such state yet we do not even know what has caused it. Is the crisis simply caused about by a poor economy or are there other underlying factors which cause it? To answer this question, it is important that we first determine what the crisis is.
By definition, an economic crisis is considered as a natural phase of each economic cycle. It is passed from one growth stage and recovers from both depression and a recession. On Karl Marx's own terms, the crisis is a solitary phenomenon. However, it is an important part in the capitalist economic system. This best explains why the crisis is considered as an inevitable consequence of today's social systems we reside in.
In order to avoid panic behavior, it is important to stress that this crisis is only temporary. At the same time, letting the public know that it has happened before can help regulate each individual's money management habits. But what really causes it?
• Lack of Technological Innovation- this leads to a reduced number of the country's accumulated capital, less individuals who are interested in investing, collapse of some companies and an increase in production costs. • Increase in Employment Rate- when this happens, the money spent on earnings and wages decreases to a level which is below normal. This then prevents capital from being accumulated.
But as witnessed by the recent economic downfall experienced throughout the world, a crisis can also depend on the economy of other countries. Once the economic power of that country gets affected by its finances, a crisis occurs throughout the nations that depend on the prior country's economy.
Knowing this, it is easy to foresee if our economy will go through another economic crisis. By then, we will have an edge because we will be able to prepare against the effects of the crisis. One way we can do this is by saving money and investing it in places we can be sure we can always depend on no matter what.