Depression (economics)

From Academic Kids

In economics, a depression is a term commonly used for a sustained downturn in the economy. It is more severe than a recession (which is seen as a normal downturn in the business cycle). Like a recession, the start of a depression is characterized by increases in unemployment, restriction of credit, reduced output and investment, price deflation, numerous bankruptcies, and reduced amounts of trade and commerce. Unlike a recession, there is no official definition for a depression, even though some have been proposed. Generally it is marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced given current resources and technology (potential output). One could say that while a recession refers to the economy "falling down," a depression is a matter of "not being able to get up."

The most noted depression is the Great Depression that affected much of the world in the 1930s. Also notable is the U.S. Long Depression that lasted from the 1870s until the 1890s. The situation of Japan in the 1990s after the bubble economy popped has also been termed a depression.

Today many economists believe that the combination of the social safety net and a much better understanding of macroeconomics makes another Great Depression highly unlikely.

See also

fi:Lama uk:Депресія (економіка)

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