The party ends. A bust is the painful hangover after a boom, when economic activity contracts sharply and the optimism that drove the expansion evaporates. Factories cut shifts. Stores close. Banks tighten lending. Households that borrowed heavily during the good times suddenly find themselves underwater.

Busts are not just numbers on a chart. They are evictions, bankruptcies, and long stretches of unemployment. The 2008 financial crisis is a recent example: a housing boom built on subprime mortgages collapsed, taking down major banks and triggering a global recession. The 1930s Great Depression was far worse, with unemployment in the United States reaching roughly 25 percent.

Recovery from a bust can be slow. Businesses hesitate to invest. Consumers pay down debt instead of spending. Banks hoard cash. Policymakers face pressure to act, but the tools available, like interest rate cuts and stimulus spending, do not always work quickly. Sometimes the best that can be said is that the bust eventually ends.

What a bust looks like

• Plummeting asset prices
• Rising foreclosures and bankruptcies
• Sharp jump in unemployment
• Frozen credit markets
• Falling consumer spending