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Economy

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What Is Economic Pressure?

By Angela Colley
Updated: May 16, 2024

Economic pressure occurs when a society or country is facing undesirable economic times. For example, it may occur during a recession, when unemployment rates are higher than usual, or after a period of cost increases. Societies respond to economic pressure in different ways, such as consumers cutting costs, shopping less, or borrowing less money from financial institutions. A period of pressure is often followed by economic reform.

The economy in capitalistic societies, such as the one in the United States, typically follow a pattern. First, the society enters a period of surplus, known as a boom. During this time, unemployment levels are low and people have higher wages or more disposable income to use on luxuries.

A period of contraction, also known as a recession, typically occurs after a surplus. The recession period is often brought on by an uptick in the unemployment rate. People start to loose their disposable income, and spend less, which results in more businesses laying off employees or closing their doors entirely. Recessions typically cause economic pressure in a society.

Economic pressure is felt in different ways by different people. For example, people who lose their jobs have a hard time paying their bills, covering the cost of insurance, and affording necessities such as food. Even people who keep their jobs may feel pressure to reduce their spending out of fear that the poor economy may affect their job in the future.

Generally speaking, consumers become more careful with their income during times of economic pressure. Many consumers cut their spending down to basic needs and reduce or eliminate any excess spending. Other consumers refrain from borrowing money that they may struggle to repay in the future, such as personal loans or lines of credit.

Businesses also suffer during periods of economic pressure. When consumers start to spend less, the business brings in less income. Over time, this can result in businesses closing retail locations, laying off employees or filing for bankruptcy.

In the past, the US government has created laws to attempt to relieve economic pressure. For example, the welfare system was created to help citizens who could no longer afford the basic human needs. Other examples include legislation to stimulate job creation, cutting taxes, or offering rebates to taxpayers.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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