Depression vs. Recession

Depression
Recession

In economics, the words recession and depression are used to refer to economic downturns. 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."

Comparison chart

Edit this comparison chart

Depression

Recession

Definition No official definition. A severe recession with a 10% decline in GDP is usually called a depression. An economic contraction when GDP declines for two consecutive quarters is usually called a recession.
Frequency Infrequent (approximately once in a generation). 3 notable depressions - Great Depression in 1930s, Long Depression from 1870s-1890s, panic of 1837. Frequent. The National Bureau of Economic Research has identified 10 recessions. (See list of recessions in the United States.)

Contents: Depression vs Recession

edit Difference between definition of recession and depression

edit Definition of Recession

A recession is a contraction phase of the business cycle. The U.S. based National Bureau of Economic Research (NBER) defines a recession more broadly 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." American newspapers often quote the rule of thumb that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. This measure fails to register several official (NBER defined) US recessions.

edit Definition of Depression

A depression refers to a sustained downturn in one or more national economies. It is more severe than a recession (which is seen as a normal downturn in the business cycle). There is no official definition for a depression, even though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions. A GDP decline of such magnitude has not happened in the United States since the 1930s.

edit Characteristics of a Recession vs Depression

The attributes of a recession include declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions are the result of falling demand and may be associated with falling prices (deflation), or sharply rising prices (inflation) or a combination of rising prices and stagnant economic growth (stagflation).

A common rule of thumb for recession is two quarters of negative GDP growth. The corresponding rule of thumb for a depression is a 10 percent decline in gross domestic product (GDP). Considered a rare but extreme form of recession, a depression is characterized by "unusual" increases in unemployment, restriction of credit, shrinking output and investment, price deflation or hyperinflation, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile/erratic relative currency value fluctuations, mostly devaluations. Generally periods labeled depressions are 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).
A devastating breakdown of an economy (essentially, a severe depression, or hyperinflation, depending on the circumstances) is called economic collapse.

edit References

Share this comparison:

If you read this far, you should follow us on:

"Depression vs Recession." Diffen.com. Diffen LLC, n.d. Web. 21 Jul 2014. < http://www.diffen.com/difference/Depression_vs_Recession >

Stay informed Related Comparisons
Follow Diffen
Make Diffen Smarter.

Log in to edit comparisons or create new comparisons in your area of expertise!

Sign up »
Top 5 Comparisons Recently Compared

Comments: Depression vs Recession

Comments via Facebook

Anonymous comments (1)

June 17, 2013, 11:16am

thanks for this great website.

— 163.✗.✗.53
0

share

Up next

GDP vs. GNP