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.

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