Economic crisis – definition, main reasons, features

An economic crisis is a sharp transition to a recession.  Crisis theory is a central achievement in

the conclusions of Karl Marx's critique of Capital. In Marxist terms, the economic crises are
caused by such three factors as:
 Full employment profit squeeze. Capital accumulation can pull up the demand for labor
power, raising wages. If wages rise "too high," it hurts the rate of profit, causing a recession.
 The tendency of the rate of profit to fall. The accumulation of capital, the general
advancement of techniques and scale of production, all involve a general tendency for the
degree of capital intensity. This is claimed to lead to a fall in the rate of profit, which would
slow down accumulation.
 Overproduction. If the capitalists win the class struggle to push wages down and labor
effort up, raising the rate of surplus value, then a capitalist economy faces regular problems
of excess producer supply and thus inadequate aggregate demand.
A situation in which the economy of a country experiences a sudden downturn brought on by
a financial crisis. An economy facing an economic crisis will most likely experience a
falling GDP, a drying up of liquidity and rising/falling prices due to inflation/deflation.
An economic crisis can take the form of a recession or a depression.