What is Depression? Difference between Recession and Depression

During the 1930s there was a serious worldwide economic crisis, beginning in the United States which is known to us as The Great Depression starting in The United States. This was the longest, most severe and most widespread 20th-century recession. A typical example of how the global economy will fail is the Great Depression.

What is Depression?

A severe and enduring recession is a depression. We have already discussed what is a recession and what are its factors, read about it here. Though there are no clear conditions for declaring a depression, the Great Depression’s particular characteristics included a fall in GDP over 10% and an unemployment rate of just 25%. Clearly put, a decline that persists for years is a significant decline.

What is Depression? Difference between Recession and Depression

Depression is more serious than a recession. While a recession represents the contraction phase of a business cycle, a decline during the economic downturn, in which everything slows down for at least six months, is a protracted period in which economic indicators deteriorate significantly. Economists estimate that in the United States there are 33 recessions from 1854 to today. Including the most recent one being the 2008 financial crisis, and the Great Depression of the 1930s. And by the look of today’s assessment 2020 maybe another year of recession due to COVID-19 pandemic outbreak across the globe and it will be more severe than the financial crisis of 2008.

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Differences between Recession and Depression

Differences between these two could be summed in two words ‘severity’ and ‘length’


  • A recession in the economic cycle is a downward trend marked by a fall in demand and unemployment. This phenomenon decreases household revenue and spending, thereby forcing major expenditures or acquisitions to be postponed by many businesses and households. Around 1973 and 1975, economic production fell 3.4 percent and the unemployment rate rose from approximately 4 percent to approximately 9 percent in possibly the greatest recession of the US after World War II.
  • In comparison, depression is a far worse contraction than a decline in the economic cycle. one which is marked by sharply decreased factory production, mass unemployment, a severe downturn or termination in development in construction, and significant reductions in foreign trade and capital movements. The distinction between a recession and a depression is that recessions can be limited to a region and depression would be far wider or on a global scale. The economic production in the United States dropped almost 30 percent during the depression, from 1929 to 1933. In the same period, the unemployment rate rose from 3% to almost 25%, according to historical reports, and all of those who were lucky enough to have a career could work part-time only.
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  • A recession is much smaller in length lasting from a year or two.
  • Whereas Depressions lasts long, and it is much deeper. For example, the Great Depression of the 1930s lasted for four years.

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