Economy Depression Definition
An old joke holds that the economy is in a recession when other people lose their jobs, but in a depression when you lose yours. A depression is a severe form of economic recession, though no precise standards exist for distinguishing the two.
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Identification
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A depression is a severe form of recession, which is a decline in economic activity, characterized by declining output and rising levels of unemployment.
Size
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Some economists suggest that a decline in inflation-adjusted gross domestic product (GDP) of 10 percent or more is a useful standard for determining when an economy is in a depression.
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Features
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Deep declines in economic output and investment, as well as high unemployment, are some of the characteristics of an economic depression.
History
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The largest economic downturn in U.S. history was the Great Depression, from 1929 to 1933. During this period, real GDP fell 30 percent, and unemployment reached 25 percent.
Prevention/Solution
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Government usually responds to depressions through fiscal measures---increased government spending intended to stimulate the economy by increasing overall demand for goods and services.
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References
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- Photo Credit Image by Flickr.com, courtesy of woodley wonderworks
