boom and bust

(noun)

A pattern of high prices in a given market or in the entire economy followed by ruinously low prices, falling production, and bankruptcies by producers.

Related Terms

Examples of boom and bust in the following topics:

  • Economic Booms and Busts

    • The Market Revolution produced an upsurge in speculative investments, which resulted in periods of economic boom and bust.
    • These speculative investments were frequently made with borrowed funds, resulting in large-scale cycles of boom and bust in the early 1800s.
    • Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention of the cotton gin in 1793.
    • Millions also migrated to fertile farmlands of the Midwest and new roads and waterways opened up new markets for western farm products.
    • The panic resulted in a wave of bankruptcies and bank failures; land prices dropped and wide-scale urban unemployment began .

  • The Magic of the Economy

    • The study of economics makes individuals cognizant of their environment and better decision makers.
    • Economics studies human activities and constructions in environments with scarce resources, and uses the scientific method and empirical evidence to build its base of knowledge.
    • An understanding of the ebb and flow of the economy through the boom and bust of the business cycles, creates the potential for emotional balance by reminding agents to limit desperation in downturns and exuberance in expansions.
    • Since economic theories are a basis of decision making and regulatory policy, being knowledgable about economics foundations allows an individual to be an active and aware participant rather than a passive economic agent.
    • In the graph above the display is limited to households and firms but other depictions of circular flow incorporate the government and international trading partners.

  • The Panic of 1837

    • These speculative investments were frequently made with borrowed funds, resulting in large-scale cycles of boom and bust in the early 1800s.
    • Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention of the cotton gin in 1793.
    • Millions also migrated to fertile farmlands of the Midwest, and new roads and waterways opened up new markets for western farm products.
    • In 1837, Vermont's business and credit systems took a hard blow.
    • Ohio, Indiana, and Illinois were agricultural states, and the good crops of 1837 were a relief to farmers.

  • The Limits of Prosperity

    • At the same time, the rapid expansion of the American economy made it prone to boom-and-bust cycles; it also led to dangerous working conditions and increased tensions between the North and South.  
    • The Market Revolution primarily benefited wealthy planters in the South, industrialists in the North, and bankers and businessmen.
    • The North and South were divided in terms of their economies, social structures, customs, and political values.
    • Earlier economic downturns had arisen from international conflicts such as the Embargo Act and the War of 1812, and these downturns had resulted in widespread domestic foreclosures, bank failures, unemployment, and slumps in agriculture and manufacturing.
    • Prior to the Panic of 1819, American bankers, who had little experience with corporate charters, promissory notes, bills of exchange, or stocks and bonds, encouraged a land speculation boom during the first years of the Market Revolution and engaged in irresponsible lending.

  • Wall Street Crash of 1929

    • The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market.
    • Congress passed the Glass–Steagall Act, mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.
    • Some 4,000 banks and other lenders ultimately failed.
    • Many academics see the Wall Street Crash of 1929 as part of a historical process that was a part of the new theories of boom and bust.
    • Discuss the causes and consequences of the 1929 Wall Street crash

  • The Market Revolution

    • The Market Revolution (1793–1909) in the United States was a drastic change in the manual-labor system originating in the South (and soon moving to the North) and later spreading to the entire world.
    • The dramatic changes in labor and production at this time included a great increase in wage labor.
    • The agricultural explosion in the South and West and the textile boom in the North strengthened the economy in complementary ways.
    • Federal and local governments, as well as private individuals, invested in roads, canals, and railroads.
    • This period of rapid development in the East and expansion in the West produced a wave of land speculation that resulted in economic periods of boom and bust.

  • The Business Cycle: Definition and Phases

    • The term business cycle refers to economy-wide fluctuations in production, trade, and general economic activity.
    • The term "business cycle" (or economic cycle or boom-bust cycle) refers to economy-wide fluctuations in production, trade, and general economic activity.
    • From a conceptual perspective, the business cycle is the upward and downward movements of levels of GDP (gross domestic product) and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around a long-term growth trend .
    • An expansion is characterized by increasing employment, economic growth, and upward pressure on prices.
    • The slowing ceases at the trough and at this point the economy has hit a bottom from which the next phase of expansion and contraction will emerge.

  • Growth Economics

    • The housing bubble of the 2000's is a recent example of a boom in the business cycle.
    • Readily available credit due to changes in the nature of acquiring mortgages meant that more and more people were buying homes and financing their purchases with loans.
    • Unfortunately, this was short-lived; the bubble burst and the boom turned into a bust that snowballed into a recession.
    • Inflation and Deflation can make it difficult to measure economic growth
    • Break down the measure of economic growth and the contributing factors behind it

  • Sonic Booms

    • It can be viewed as a Doppler effect on steroids; sonic booms generate an enormous amount of energy, and sound like explosions.
    • The 'crack' of the whip is a result of this sonic boom.
    • The shock waves radiate out from the sound source, and create a "Mach cone' .
    • There is a big boom when there is a sudden change in pressure, and since the pressure changes twice, this is a double boom.
    • Identify conditions that lead to a sonic boom and discuss its properties

  • The Baby Boom

    • The Baby Boom is generally defined as the increase in births between 1946 and 1957, following the end of World War II.
    • There is some disagreement as to the precise beginning and ending dates of the post-war boom, but most agree that it began in the years immediately after the war ceased and ended more than a decade later—birth rates in the United States started to decline in 1957.
    • In countries that suffered heavy war damage, displacement of people and post-war economic hardship—Poland and Germany, for example—the boom began some years later.
    • The baby boom triggered booms in housing, consumption, and the labor force.
    • The "birth boom" of the post-war period is as much defined by the deaths that preceded and followed it as it is by an exceptionally high fertility rate.