What Is an Economic Meltdown?

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An economic meltdown occurs when a country experiences a sudden downturn in the state of its economy. During an economic meltdown, many people will be unemployed or underemployed, companies may go out of business, wages and benefits will drop or stagnate, inflation will occur, the nation's gross domestic product (GDP) will decrease and it may be difficult for many prospective borrowers to obtain a loan.

The Great Depression is a well-known example of an economic meltdown. During the 1930s and 1940s, countries all over the globe experienced rapid declines in their economies. For the U.S., it was driven in part by Black Tuesday, a day when stock market prices plummeted. Companies and individuals were unable or unwilling to spend money, further driving the nation into financial crisis.