Economic Collapse

DEFINITION of 'Economic Collapse '

A complete breakdown of a national, regional or territorial economy. An economic collapse is essentially a severe version of an economic depression, where an economy is in complete distress for months, years or possibly even decades.

A total economic collapse is characterized by economic depression, civil unrest and highly increased poverty levels. Hyperinflation, stagflation and financial-market crashes can all be causes. Government intervention is usually necessary to bring an economy back from collapse, but can often be slow to remedy the problem.

BREAKING DOWN 'Economic Collapse '

The Great Depression in the United States is a prime example of an economic collapse. The 1929 stock market crash brought on a collapse that lasted for many years and saw high levels of poverty. Well-known economist John Maynard Keynes claimed this was from the total lack of government involvement in the economy or the financial markets.

RELATED TERMS
  1. Depression

    A severe and prolonged downturn in economic activity. In economics, ...
  2. Great Depression

    An economic recession that began on October 29, 1929, following ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  4. Poverty Trap

    A mechanism which makes it very difficult for people to escape ...
  5. Poverty Gap

    The average shortfall of the total population from the poverty ...
  6. Depressed

    A state or condition of a market, product or security characterized ...
Related Articles
  1. Personal Finance

    Recession And Depression: They Aren't So Bad

    Financial downturns are part of the economic cycle and may have important long-term benefits.
  2. Bonds & Fixed Income

    Can Keynesian Economics Reduce Boom-Bust Cycles?

    Learn about a British economist's proposed solution to a common economic problem.
  3. Economics

    What Caused the Great Depression?

    Learn how government actions may have contributed to this major economic downturn.
  4. Economics

    Understanding Poverty

    Poverty exists when a person’s or community’s basic needs are not being met because financial resources are lacking.
  5. Economics

    A Comparison Between a Default and a Collapse

    Is the Greek default similar to the Lehman Brothers collapse?
  6. Economics

    How Will Rate Hikes Impact The Banking Sector?

    Banks traditionally rally in a rising rate environment but it may be different this time around.
  7. Fundamental Analysis

    Is Brazil Currently in a Depression?

    Find out if Brazil, the world's seventh-largest economy, may have finally slipped into an economic depression, and learn the reasons why.
  8. Economics

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  9. Economics

    No Exit: What Could Happen If the Eurozone Breaks Up?

    There is no exit strategy for nations in the eurozone or the EU because most members acknowledge that they are far better off together than apart.
  10. Bonds & Fixed Income

    Why Didn't Quantitative Easing Lead To Hyperinflation?

    Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy.
RELATED FAQS
  1. Why is Keynesian economics sometimes called depression economics?

    Learn how in observing the effects of the Great Depression, Keynes identified flaws in classical economic theory particularly ... Read Answer >>
  2. How does macroeconomics explain "stagflation"?

    Learn about stagflation: a macroeconomic term used to describe economic turmoil. It is a time of serious inflation, slow ... Read Answer >>
  3. How was the American Dream impacted by the housing market collapse in 2008?

    Learn how the American Dream was impacted by the housing collapse in 2008. Due to the housing collapse, millions ended up ... Read Answer >>
  4. What macroeconomic problems do policy makers most commonly face?

    Learn about the macroeconomic factors policymakers have to be concerned with when deciding on economic policies, such as ... Read Answer >>
  5. Why is Keynesian economics sometimes called demand-side economics?

    Learn why Keynesian economics is sometimes called demand-side economics, and find out how government spending increases aggregate ... Read Answer >>
  6. Where does stimulus economics come from?

    Depending on which type of economist you talk to, stimulus economics originated from the ideas of either a book published ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center