What is the difference between a recession and a depression?

A recession is a significant decline in economic activity that lasts for more than a few months. It is typically characterized by a decline in GDP, a rise in unemployment, and a decrease in industrial production. Recessions are a normal part of the business cycle and occur periodically in modern economies.

A depression, on the other hand, is a severe and prolonged recession that lasts for several years. Depressions are characterized by extremely high levels of unemployment, bankruptcies, and bank failures, and can have a lasting impact on the economy and society as a whole.

The main difference between a recession and a depression is the severity and duration of the economic contraction. While recessions are a normal part of the economic cycle, depressions are much rarer and can have devastating consequences for individuals and businesses alike.

A recession is a period of economic decline, while a depression is a more severe economic downturn.

A recession is defined as a two-quarter decline in gross domestic product (GDP). GDP is the total value of all goods and services produced in a country in a given period of time. A recession can be caused by a variety of factors, including a decline in consumer spending, a decline in business investment, or a decline in government spending.

A depression is a more severe economic downturn than a recession. A depression is typically defined as a decline in GDP of at least 10%. Depressions can last for several years and can have a devastating impact on the economy.

The Great Depression of the 1930s is the most famous example of a depression. The Great Depression began in 1929 and lasted for nearly a decade. During the Great Depression, GDP fell by 25%, unemployment reached 25%, and millions of people lost their homes and savings.

Recessions and depressions can have a significant impact on individuals, families, and businesses. During a recession or depression, people may lose their jobs, their homes, and their savings. Businesses may be forced to close or lay off workers. The government may be forced to raise taxes or cut spending.

The National Bureau of Economic Research (NBER) is a private, nonprofit research organization that is responsible for dating recessions in the United States. The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

The NBER does not use the term "depression" to describe economic downturns. However, the NBER does recognize that there are periods of economic decline that are more severe than recessions. These periods are sometimes referred to as "depressions" by economists and the media.

The following are some of the key differences between a recession and a depression:

• Duration: A recession typically lasts for two quarters, while a depression can last for several years.
• Severity: A depression is typically more severe than a recession, with a greater decline in GDP, employment, and income.
• Impact: A depression can have a devastating impact on the economy, individuals, families, and businesses.