ECONOMIC DOWNFALL

REASONS FOR ECONOMIC DOWNFALL:

There are a number of reasons behind the economic downfall of a country but there are some reasons which can be found normally everywhere.The reasons for economic downfall are limitless but some potential and common to every economy are covered on this article.

1.INCREASE IN POPULATION:Increase in population is one of the main reason for economic downfall of any country.This shows the inverse relation of population with the economy,at times not every time.The reason behind this is that it reduces GDP per capita of the country as GDP per capita is calculated by dividing GDP of the country with its population.

2.DECREASE IN MAN POWER:This should not be considered as a contradiction with the above point.Although it looks to be contradicting but the logic behind this is that population is essential for the development of a country.For example, China,being the biggest country by population has made wonderful development during the last two decades.On the other hand,the biggest country of Europe,Germany,also has recognized that man power is required for the development of economy as the lack man power in 2007-08.

3.LAW AND ORDER SITUATION:Law and order situation plays a vital role in stabilizing the economy.Countries where law and order situation is not satisfactory face a lot of difficulties.For example there shall be no investment from outside the country and even from the people of that country in a country where law and order situation is no good.

4.ADVERSE TERMS OF TRADE:An agricultural country,today,has adverse terms of trade if that country is not technologically developed.This is a very simple economic concept that perishable goods are cheap as compared to non-perishable goods because of their storage problems and other issues.The terms of trade is the ratio of amount expanded for import and received from export.This is the reason why technologically less developed countries have adverse TOT.For example Pakistan which exports a large number of its agricultural products for just a single missile.

5.POLITICAL INSTABILITY:Political instability has a direct relation with economic stability.The reason is that for the development of the economy long term policies for their full period are required rather than long term policies for a shorter period.

6.DEVALUATION OF CURRENCY:A country's currency plays a vital role in the development of a country's economy.A country whose currency has less value than the currency of a country to which it trades will definitely face the economic recession as it expands more for imports because of its devalued currency.

The above discussed points may not be applicable in every situation and these are written according to my understanding of this topic.But so far I studied I found these points to be common in almost every country's economic down falls.

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