But people do not turn to the dictionary for cheap puns and bad jokes we hope ; they come in search of steely-eyed realism and hard truths. So here are some things we can tell you about recessions , depressions , and the differences between the two. A recession is a downward trend in the business cycle , one that is characterized by a decline in production and employment. This trend lowers household income and spending, which consequently causes many businesses and households to delay making large investments or purchases.
A depression is a major downswing far more severe than a downward trend in the business cycle; one which is characterized by sharply reduced industrial production, widespread unemployment, a serious decline or cessation of growth in construction, and great reductions in international trade and capital movements.
Another difference between a recession and a depression , in addition to the severity and effects of each, is that recessions may be limited geographically limited to a single country , whereas depressions such as the Great Depression of the s can occur across many nations. Now that the differences between a recession and a depression have been worked out we can all go back to our normal way of addressing this subject: making bad jokes and attributing them to people who probably never said them.
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Log in Sign Up. Usage Notes 'Recessions' vs. What to Know A recession is a downtrend in the economy that can affect production and employment, and produce lower household income and spending. More Words At Play. But the word, of course, has other uses. You might also encounter the word recession in various ceremonies, such as religious services, weddings, and graduations. A recession , here, is a withdrawing procession.
Yes, recession and procession share a root. During a ceremonial recession, a special song, called recessional , is often played to mark the celebratory end of an event. Like recession , depression comes from Latin. Economic slumps, slowdowns , downswings , downturns —whatever we may call these contractions of the economy, and whether these crises reach the proportions of recessions or worse, they can certainly make us feel, well, depressed and like we want to recede.
But there may be some consolation in better understanding economic recessions and depressions, and that all things have their cycles, their ups and downs.
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Social recession Economic recessions have inspired the concept of a social recession , or a decline in the quality of our social lives, especially when we have limited and fewer interactions with people.
Unemployment is a major aspect of a recession. Learn more in our article on the difference between furlough vs. What causes a recession? But, in very general terms, recessions can be caused by such factors as: high inflation high interest rates overproduction asset bubbles unsustainable increase in the value of goods, property, or other investment overextended credit and high debt bank runs and lack of consumer confidence trade wars problems in financial markets, policies, and regulation Now, we saw bears and bulls above.
What is a depression? A depression is a severe and prolonged downturn in economic activity. Depressions are relatively less frequent than milder recessions, and tend to be accompanied by high unemployment and low inflation. In times of depression, consumer confidence and investments decrease, causing the economy to shut down. Economic factors that characterize a depression include:. Economists disagree on the duration of depressions.
Some believe a depression encompasses only the period plagued by declining economic activity. Other economists argue that the depression continues up until the point that most economic activity has returned to normal.
A recession is a normal part of the business cycle that generally occurs when GDP contracts for at least two quarters. A depression, on the other hand, is an extreme fall in economic activity that lasts for years, rather than just several quarters. This makes recessions much more common: since , there have been 33 recessions in the U. The Great Depression lasted roughly a decade and is widely considered to be the worst economic downturn in the history of the industrialized world.
It began shortly after the Oct. After years of reckless investing and speculation the stock market bubble burst and a huge sell-off began, with a record The United States was already in a recession, and the following Tuesday, on Oct. Although the Great Depression began in the United States, the economic impact was felt worldwide for more than a decade. The Great Depression was characterized by a drop in consumer spending and investment, and by catastrophic unemployment, poverty, hunger, and political unrest.
In the U. During the Great Depression, unemployment rose to Shortly after Franklin D. Policymakers appear to have learned their lesson from the Great Depression. New laws and regulations were introduced to prevent a repeat and central banks were forced to rethink how best to go about tackling economic stagnation.
Nowadays, central banks are quicker to react to inflation and are more willing to use expansionary monetary policy to lift the economy during difficult times. Using these tools helped to stop the great recession of the late s from becoming a full-blown depression. A series of factors can cause an economy and production to contract severely. In the case of the Great Depression, questionable monetary policy took the blame. After the stock market crashed in , the Federal Reserve Fed continued to hike interest rates —defending the gold standard took priority over pumping money into the economy to encourage spending.
National Bureau of Economic Research. Download PDF. Accessed Dec.
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