The terms “recession” and “depression” both refer to periods of economic decline, but they differ significantly in terms of severity, duration, and overall impact.
Recession:
A recession is typically defined as a significant decline in economic activity that lasts for at least two consecutive quarters (six months) and is visible in various indicators such as GDP, employment, and retail sales.
Recessions are considered a normal part of the economic cycle and can be caused by various factors, including reduced consumer confidence, high inflation, or external shocks.
The effects of a recession are generally more manageable, with economies usually recovering within a year or two.
Depression:
A depression is a more severe and prolonged downturn in economic activity. There is no standard definition, but it is characterized by a significant decline in GDP, high unemployment rates, and extended negative impacts on businesses and consumer spending.
Depressions last considerably longer than recessions, often spanning several years, and lead to more drastic societal changes, including widespread bankruptcies and a dramatic drop in living standards.
The most well-known example of a depression is the Great Depression of the 1930s, which had a profound and lasting impact on economies around the world.
In summary, while both terms describe economic downturns, a recession is typically shorter and less severe than a depression, which denotes a deeper and more enduring economic crisis.
The terms “recession” and “depression” both refer to periods of economic decline, but they differ significantly in terms of severity, duration, and overall impact.
The effects of a recession are generally more manageable, with economies usually recovering within a year or two.
Depression:
In summary, while both terms describe economic downturns, a recession is typically shorter and less severe than a depression, which denotes a deeper and more enduring economic crisis.