In economics, a depression is a sustained, long downturn in one or more economies. It is more severe than a recession, which is seen as a normal downturn in the business cycle.

Considered a rare and extreme form of recession, a depression is characterized by abnormal increases in unemployment, restriction of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation or hyperinflation are also common elements of a depression.

Definition

There is no widely-agreed-upon definition for a depression, 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. 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 using current resources and technology (potential output). The economic theory most concerned with periods of inflation, deflation and depressions is known as the Kondratieff wave. Another proposed definition of depression includes two general rules: 1) a decline in real GDP exceeding 10%, and 2) a recession lasting 3 or more years..

Great Depression

main: Great Depression The most well-known depression is the Great Depression that affected most of the economies in the world throughout the 1930s. The depression began during the Wall Street Crash of 1929, and the crisis quickly spread to most national economies. Between the years of 1929 and 1933, GDP decreased by 33% and unemployment rates increased to 25%. Possible causes for the Great Depression include the stock market and the bank panics of October 1930.

A long-term effect of the Great Depression has been the departure of every major currency from the Gold Standard.Fact: date=December 2008

Long Depression

main: Long Depression The Long Depression, known at the time as the "Great Depression", lasted from about 1873 to 1896. It affected much of the world and was contemporaneous with the Second Industrial Revolution.

Panic of 1837

main: Panic of 1837 The Panic of 1837 was an American financial crisis, built on a speculative real estate market . The bubble burst on May 10, 1837 in New York City, when every bank stopped payment in gold and silver coinage. The Panic was followed by a five-year depression, with the failure of banks and record high unemployment levelsFact: date=January 2009.

See also

• Recession
• List of recessions
• List of recessions in the United States
• Stagflation
• Late 2000s recession