Ever wondered what it might feel to have confused over the terms, which are often used interchangeably? Let us get the basics clear, with straightforward facts!
The rapid decline in the economic sector, leading to a widespread crash of the economy and unemployment on a large sector, is mostly caused due to Recession and Depression- Economically. They both are vastly different terms, often confused for being the same.
Why do people often confuse these terms?
- Mostly because both of them directly refer to the economic slowdown.
- Both recession and depression have lasting aftereffects which are the same- unemployment.
- Usually lasts for a shorter span of time- 6 months to 12 months. It doesn’t go on increasing at a huge rate and a long span of time.
- The GDP (Gross Domestic Product) of an economy goes down, collecting from several quarters of the economy.
- An example could be: The Great Depression was caused due to the collective crashing of the economies from August 1929- March 1933 and from May 1927-June 1938. Thus, the collective terms of continuous economic crashing is a recession.
What are the causes of a recession?
Recession is caused majorly due to the stock market crash, high-interest rates put by banks, and deregulation of the economies. Due to these factors, the economy crashes down and the customers and the buyers lose interest in the low prices of goods and hence refuse to buy them. Thus, the economy hits an all-time low.
- There have been 33 recessions to date.
- Depression is not short-termed- it extends over a span of a decade.
It is rather, a collection of small recessions over the period.
- If a country faces recession too often, then it is likely to be plunged into depression For example? The Great Depression of America, that lasted a decade and was the root cause of unemployment and people losing jobs
- Depression is more of a collection of the downward spiral of unemployment, bankruptcies, and major loss of monetary funds.
What are the causes of Depression?
The last time the world witnessed a severe depression and an economic landslide, was in 1929, where the stock market crashed down causing widespread loss of money, bankruptcies, and unemployment. The Great Depression was caused due to a collection of short term recessions over the span of time- August 1929- March 1933 and May 1927-June 1938. The unemployment rate soared up to 25% – an all-time high in the economy.