One of the economic topics I have been recently learning was “Boom and bust.”
An interesting topic and one I am going to show you today.
What is Boom and Bust?
It’s exactly what it sounds like, ‘‘Boom’’ is when the economy grows, and then ‘‘Bust’’ is when the economy collapses. This is a cycle that happens again and again. It’s like an infinite wavy line. It goes up and down forever.
Why does the economy have to grow in a loop of ups and downs?
This all depends on how the central bank manages its money. Let’s say that it lends money for a lesser interest. People will start borrowing more and more money. This automatically leads to them investing more in different services/products. In return, the invested companies start to grow and generally the whole economy.
Now when people get lots and lots of money due to their investments being successful and also due to them borrowing lots of money, they tend to invest more than they need to. This means that there is a higher chance of people losing money. When they lose money they can’t repay the bank, hence the bank is forced to make the interest higher. Now the people are in debt, loans are expensive and the economy is failing. Soon the economy will recover and this whole cycle will start again.
Will the employees be affected by this? How?
Most certainly, yes. The economy’s ups and downs will affect the employees greatly. How? It’s all built like an ecosystem. When the Boom period is active, there will be higher wages and more job positions. When the bust period is active, there will be fewer job positions as the CEOs are likely to cut costs. There will be fewer wages as well.