Difference between Recession and Depression
Difference between Recession and Depression

Difference between Recession and Depression

In the field of economics, the two terms recession as well as depression are utilized to allude to economic downturns. Recession is a term that alludes to economy “falling down” whereas depression is a discussion of “not being able to get up.” These two terms allude to the time of credit crunch practiced by the economy. At whatever point we discuss these two circumstances, some confusion and puzzlement comes in everyone’s mind. Recession is similarly less critical as compare to depression. Recession is endured by a nation’s economy yet depression can be practiced by more than one economy. The main focus of this article is to discuss the contrasts exist between these two terms i.e. recession and depression.

Recession

Recession alludes to a time period of the downfall in an economic cycle when there exists a fall in the nation’s GDP for a few quarters. It shows up in the slowdown the economic activity in the country for a couple of months. It might bring about the decrease in GDP, employment, corporate profits, industrial production and so forth. At the point when there is a decrease in demand of consumers, the organizations won’t have the capacity to grow their business and they quit enrolling work force. As an aftereffect of that unemployment will increase in economy. In the mean time, the recession stage will begin. Along these lines, the customer spending will more decrease. The recession might bring about extreme issues in the economy. For overcoming this problem, the government might expand money supply in the economy and change financial approaches.

Depression

Whenever recession ends up being more extreme and proceeds for a long haul, in more than in one economy, the circumstance is called as depression. The essential standard of investigating depression is the existence of negative GDP of 10% of additionally, going on for over three years. Depression might bring about bank failures, bankruptcies, price deflation, unemployment, business failures and so forth. It might bring about the close down of economy. The primary pointers of depression are high level of fluctuations, decline in credit availability, high level of unemployment and many more.

Recession VS Depression

  • Definition:

Recession is characterized as a time period when an economic activity of any country is in downfall situation, which leads to decrease in GDP of country.

Depression is the condition when the economy is facing constant and severe recession.

  • Meaning:

From the above definition, we come to know that recession is the cause of downfall of economy.

From above definition, we come to know that depression is the effect of recession or we can say that it is an advanced type of recession.

  • Occurrence:

The occurrence of recession in economy is very frequent and it can be said as economic cycle.

The occurrence of depression in economy is less frequent and can be said as very rare.

  • Criteria:

The main criterion to measure the recession is the negative GDP (Gross Domestic Product) for two sequential quarters.

The main criterion to measure the depression is the downfall in GDP (Gross Domestic Product) of about 10% or more than this and this downfall remains for over three years.

  • Strikes:

Recession strikes the economy of different nations at diverse period of time.

Depression strikes the economy of world at the same time period.

  • Unemployment:

In recession, unemployment rate of economy of country is very low almost it reaches up to 10%.

In depression, unemployment rate of economy of world is very high as it reaches up to 20% or more than this.

  • Consequence:

The consequence of recession to the economy is severe but less than the effect of depression.

The consequence of depression to the economies is more severe and it may lasts for long period.

Conclusion

From above article we come to know that recession is the time period when an economic activity of any country is in downfall situation, which leads to decrease in GDP of country whereas depression is the condition when the economy is facing constant and severe recession. Depression is not more than the advanced type of recession. The criteria for recession is negative GDP for constantly two quarters conversely, for depression, downfall in GDP of about 10% or more and remains for three years. Recession usually occurs very frequently and depression occurs rarely. In recession, unemployment rate is low as compare to the rate in depression. Depression is more severe as compare to recession.