Depression (economics) Totally Explained

Everything about Depression Economics totally explained

In economics, a depression is a term commonly used for a sustained downturn in the economy. It is more severe than a recession (which is seen as a normal downturn in the business cycle). Considered a rare but extreme form of recession, the start of a depression is characterized by unusual increases in unemployment, restriction of credit, shrinking output and investment, price deflation and/or hyperinflation, numerous bankruptcies, reduced amounts of trade and commerce, as well as violent currency devaluations. Unlike a recession, there's no official definition for a depression, even though some have been proposed. Generally it's 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). 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." The most noted depression is the Great Depression that affected much of the world in the 1930s. Also notable is the U.S. Long Depression that lasted from the 1870s until the 1890s. The situation of Japan in the 1990s after the bubble economy popped has also been termed a depression.
Today many economists believe that the combination of the social safety net and a much better understanding of macroeconomics makes another Great Depression highly unlikely. Others believe that with growing US deficits, increasing bankruptcies, the attainment of peak oil, plus other factors, the US is in the early stages of the next great depression.
It should be noted that governments may resort to heavy-handed methods to deal with the civil unrest caused by the economic difficulties presented by a depression.

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