Definition of Economic Downturn – Whats it All About Then?
These days, if you haven’t heard the phrase “economic downturn” you must be living a pretty isolated life! Everywhere you go, in fact, whether it’s in your living room watching the news, or a dinner party, you’re likely to hear that particular phrase bandied about. So, in the interests of making things a little easier to understand, here are the facts. The Economy is a Wave Far from being a straight line, or even a gentle curve, the global economy is a little like a wave. At regular intervals, it will fall into a trough, but that trough is always followed by a crest. This, in a nutshell, is the downturn – the point at which that wave moves from the peak of a crest, to the bottom of a trough. It’s All About Investment When we say the economy is in a downturn, what we really mean is that investors – people and businesses with money – are choosing to hold onto their cash, rather than invest. This affects liquidity, and means that businesses which are undercapitalized, or have poor cash fl
