What are the four stages of economy?

Answer 1

The economy generally has 4 or sometimes 5 stages. First one being the boom of economy or growth phase, where there is lot of money in the market and with the people. The purchasing power goes up, product demand goes up, production goes up, and revenues and profits go up. But this cannot last forever. Due to increased money flow and spending, prices go up and this leads to inflation. This is the second stage. There is relative slowdown in economy. Prices go up so people have less to spend and and to save. Demand goes down, production and earnings go down. The economy may take a rebound from here or go further into recession. This is the third stage where situations starts to actually worsen. Increased prices, less earning, demand goes down, revenues and profits go down. Companies and organizations start downsizing and cost cutting. This leads to unemployment and further decreases the flow of money into the system. This kind of runs into visicious circle. People dont want to take risk of investing and starting new businesses. Foriegn investment in reduced. Even worse form of recession is depression. But as with boom, even recession and depression cannot last forever, and the economy starts to take a turn, and leads to recovery. Recovery is the fourth stage of economy. Though there is no fixed time limit before recession or inflations turns to recovery, and recession sometimes lasts longer than boom. In recovery, situation starts to improve. Prices ease, money starts to flow. New investments comes in and finally recovery leads to boom in economy which was the first stage. Deepak