The financial economy effects of the economic crisis


 Effects of the economic crisis

Among the most prominent effects of the existence of the economic crisis, we mention it as follows: [1]


Economic protection

The occurrence of the economic protection policy can be observed when the government resorts to placing restrictions on imported goods or placing restrictions on prices applied to many products. In addition, the government is also seeking a campaign to save government jobs during the period of the state’s passage through the economic crisis, because usually the economic downturn causes large numbers. From job layoffs.


Reduced consumer demand

One of the most prominent effects of the economic crises is the low level of per capita income. This leads to a decrease in the financial volume allocated to spending and purchases by the individual and a decrease in his desire to purchase goods and services.


Shrinkage in the size of the markets

Many countries going through economic crises are unable to expand their commercial markets. This reduces the country's exports and reduces the opportunities to collect profits for exporting countries, and consumer goods become stagnant and accumulated without selling.


Decrease in the level of credit

When the value of credit is reduced during an economic crisis; The quantities of goods are also decreasing, and companies are less able to import those goods. As for individuals, the decrease in the value of credit will limit the volume of consumer purchases.


Fluctuations in currency rates

The process of exporting goods in any country depends on the exchange rates of currencies from one country to another, but if there is any increase or decrease in the currency of the issuing country during the period of economic crisis, the export and import operations will be affected, it can - for example - that a rise in the currency exchange rate leads to higher prices. Commodities coinciding with a lack of imports in the free trade market.


Reasons for an economic recession

The following are the main causes of economic recession: [2]


The increase in the interest rate resulting from the increase in prices, which in turn reduced the level of financial liquidity.

The loss of confidence in investment will cause the stock market to collapse and consequently the flight of capital from companies.

Low housing prices and low sales.

Decline in manufacturing requests.

Increasing numbers of illegal financial transactions, such as fraud, which rendered banks unable to recover funds.

Lifting restrictions on bank loans.

The increase in the prices of commodities and the decrease in the demand for them, which causes the layoffs of employees working in those institutions that sell goods.

Deflation that encourages consumers until commodity prices fall.

Proposals and recommendations to reduce economic crises

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