An economic crisis is caused by the decline of business and consumer confidence. It shows the tipping point in the business cycle where the peak moves to contraction. Economic crisis creates a situation where the market starts to collapse and the business sector experience huge loss. The economic information plays an important role to have a check and balance on the future of the economy. It is important to note the key factors that may lead to an economic crisis and later recession and depression in the economy. This loss is caused by several factors;
- Consumers lose confidence in markets and people stop buying goods and services alarming an exit sign which creates panic and eventually sales slowdown.
- Industrial sector loses its revenues due to which they offer fewer job opportunities resulting in higher employment rates.
- The overall consumer and producer sides get negatively influenced which is a sign of decline in the gross domestic product growth.
- Higher interest rates raise the liquidity limit of money which is often done to protect the value of the dollar and countries experience fluctuations in their currency value.
- The sudden loss of confidence in investment crashes the stock market eventually draining the capital out of business.