Question

Economies are not stagnant; they expand and they contract. Please explain each of the terms with example.

Answer 1

In any economy if there is no growth for a prolonged period of time or the growth less than 2 to 3 percent perannum is considered as stagination thus at the period of economic stagination economy will experence high unemployment,and part time involuntry unemployment.

The stagination may occur in macro economic scale.

The stagination also may be specific in smaller scale for industries and companies.

Example

The long depression during during 1873 fallowed by the stagination intermixed with the surges of growth untill studier growth resumed around 1986.

Expansion is a phase of Business cycle during this phase real gross domestic productivity grows for two or more consecutive quarters moving from trough to the peak.

During this period economy expereances rise in employment level, Gdp rises, percapita income grows , consumers start spending and equity markets generally perform well.

Expansion in and average lasts for four to five years some times it may gors for twelve months to ten years.

Contraction is also a phase of business cycle and the whole economy comes down during this phase.

Gross domestic productivity is an indicator of contraction , when an economy's gross domestic productivity declines for two or more consecutive quarters than an economy running towards contraction.

High unemployment, decrease in productivity ,low wages thus the consumers purchasing power comes down .

Example

In the histry of America the great economoic depression last for full decade that is from 1929 to 1939.

contraction occured during during 1980 when fedral reserve sent when interest rates soaring to quilch inflation