Meaning of economic depression
What is Economic Depression:
An economic depression is a sustained decline in the economy of a country or region over an extended period of time, which can last three years or more.
Economic depressions are characterized by declining production, falling consumption and investment, a significant decline in gross domestic product (GDP), falling wages, currency devaluation, and rising unemployment. All this accompanied by the closure and bankruptcy of companies and banks.
The periods considered as depressions suppose a substantial decrease in the purchasing power of the population, which has a negative impact on consumption, since a fall in demand usually also brings a decrease in people's salaries and investments.
During economic depressions, the economy of the affected country or region goes through serious financial difficulties, which affect both banks and companies, as well as individuals and families, which translates into great social deprivation.
See also Economic crisis.
Economic depression and recession
Both the depression and the recession imply the decline of an economy, reflected in the gross domestic product, which shows negative growth. However, the recession is a normal and temporary slowdown in the business cycle, lasting at least two quarters, while the depression is a recession that lasts over time.