The Difference Between Economic Depression and Recession

The Meaning of Economic Depression and Recession

Economic depression and recession are two terms that are often used in discussions about the economy. While they both refer to a decline in economic activity, there are key differences between the two.

Economic Depression

Depression: The period when an economy begins to shrink is called a depression. It is a sustained, long-term downturn in economic activity characterized by high unemployment, reduced consumer spending, and low business investment. During a depression, the economy experiences a severe contraction and negative GDP growth for an extended period of time.

Recession

Recession: The answer on Ed is recession. A recession occurs when the GDP is lowered for 2 quarters in a row when it only starts to shrink not to be confused with depression; which is a prolonged recession. It is a period of declining economic activity that lasts for a shorter duration than a depression. During a recession, there is a decrease in consumer spending, business investments, and overall economic growth.

While both economic depression and recession involve a decline in economic activity, the main difference lies in the severity and duration of the downturn. A depression is a more prolonged and severe economic downturn, while a recession is a less severe contraction that typically lasts for a shorter period of time.