What is economic stagnation?

Economic stagnation, which is sometimes called economic immobilism, occurs when the economy passes through a period of slow growth. Opinions on what is a slow growth differ, but most economists apply the term stagnation to any extended period during which gross domestic product grows by less than 2 or 3 percent. In capitalist countries, growth is considered a key part of a healthy economy. Economic stagnation

often begins when the supply of goods overcomes consumer demand. During the recession, many companies will begin to release workers, leading to less total one -off income and reducing consumer expenditure. Before the manufacturers have a chance to slow production, the excess of the inventory accumulates rapidly, leading to an imbalance between supply and demand. Economic stagnation begins when companies slow down production and are waiting to exhaust existing stocks before more goods. The result of economic boom if consumers save a large percentage of their oneof the first income. In such situations, people have been saving excess resources over the years, causing consumers more than enough money to buy the goods it needs and lead to a temporary increase in consumption. Then, consumer decreases and consumers with large cash supplies do not have little motivation to work more, so production slows down and the gross domestic product of the nation begins.

Governments can use a number of different tools to try to solve economic stagnation, which range from increasing the benefits of unemployment to printing more money. Recipients of unemployment benefits are able to spend more than those who do not receive such funds and their expenses can help solve imbalances between supply and demand. Governments must raise taxes to cover the costs of increased expenses, and this means that other consumers are experiencing a decrease in income as a result of increasing taxation. Taxpayers must reduce their inAnyway to take into account their increased tax burden, and their reduced expenditure causes the economy to stagnate again.

Some governments seek to support consumer consumer consumer by printing more money and reducing interest rates. These actions can stimulate the economy in the short term, but in the long run, excessive cash in the economy can lead to inflation. With rising prices, consumers have less money to spend and before the long supply begins to predict demand and the nation enters the next period of economic stagnation. Despite the efforts of economists and politicians for combat stagnation, economic decreases are cyclical.