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Spare capacity in the Economy.

  • 03-10-2013 10:59am
    #1
    amandstu
    Registered Users, Registered Users 2 Posts: 3,960 ✭✭✭


    This is a theoretical question I suppose.

    Imagine an economy where people are feeling confident and by and large ,within their idividual (and corporately individual) contraints they feel free to spend and invest.

    Now imagine a shock to this economy and people prefer to retrench .
    The question I have is what would be the maximum difference between these 2 situations that could occur over a set period (1 month , I year..)

    If you measure it in terms of overall spending I wonder if could it drop by 50% ? More?
    Are there any historical records that show what is possible.

    Is there a league table of economic disasters?


Comments

  • #2
    Geuze
    Registered Users, Registered Users 2 Posts: 14,033 ✭✭✭✭Geuze


    A drop of 10% in output/spending in one year would be deemed very unusual, and a very serious recession.

    A cumulative drop of 25% over a few years is also very severe, though not unheard of.

    The Great Depression saw output drop from peak to trough of maybe 30% over 4 years, with unemployment up to 25%.


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