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What Is A Soft Landing (In Economics)?
A soft landing in economics refers to a scenario in which an economy slows down from a period of rapid growth to a more sustainable pace, without experiencing a recession or a sharp drop in economic activity. It is a desirable outcome for policymakers, as it allows for a smooth transition to a more stable economic environment without the pain of a sudden downturn.
A classic example of a soft landing was observed in the United States during the mid-2000s. After several years of strong economic growth and low unemployment, the Federal Reserve gradually raised interest rates to slow down the economy and prevent inflation from rising too quickly. This resulted in a slow-down of economic activity, but did not cause a recession or a sharp decline in GDP.
Another example of a soft landing can be seen in the Australian economy in recent years. Despite a slowdown in the mining sector, the country has managed to maintain relatively strong economic growth and low unemployment, thanks in part to a flexible monetary policy and a strong services sector.
Achieving a soft landing is not an easy task, as policymakers must balance several conflicting objectives, including maintaining economic growth, controlling inflation, and ensuring financial stability. For example, if interest rates are raised too quickly, it can lead to a sharp decline in…
