What is the Difference Between a Depression and a Recession?

Economic depression (depression): When the economic recession (recession) for more than 3 consecutive years , or real GDP (real GDP) negative growth of more than 10% is called economic depression (depression).

Economic depression

So how do we distinguish between "recession" and "depression"? A more common method is to observe the national

Changes in GDP determine the difference between "depression" and "recession." In any period of economic recession, a real GDP decline of more than 10% can be regarded as an "economic depression"; or if the economic recession lasts for more than 3 years, it can also be regarded as an "economic depression". The economic downturn in the "recession" will not be so severe and will not last as long as the depression.

Two principal criteria for distinguishing a depression from a recession: a decline in real GDP that exceeds 10%, or one that lasts more than three years.

According to this standard, the Great Depression of the United States in the 1930s met two conditions: from August 1929 to March 1933, during the first phase of the Great Depression, real GDP fell by nearly 33%; in 1937, 5 Between June and 1938, during the second phase of the Great Depression, real GDP fell by 18.2%.

The Great Depression is the worst economic recession in the United States. The first stage of the economic depression lasted for 43 months. It was second only to the 1873 American Railway Crisis (1873-1879) in the 19th century and lasted 65 months. .

After World War II, the U.S. economy has never experienced a near "economic depression"

unemployment rate

Stage. From the end of World War II in 1945 to the beginning of the 21st century, the worst economic recession in the past 60 years occurred from November 1973 to March 1975, when real GDP fell by 4.9%.

Great Depression

America's Great Depression qualifieson both counts, with GDPfallingbyaround 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America's deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that honor goes to the one in 1873-79, which lasted 65 months.

As long as the GDP shows negative growth and lasts for 6 months, that is, two quarters, it can be considered a recession.

A recession lasting up to three years, or a GDP decline of more than 10% during the recession, can be considered a depression.

When the economic recession and economic depression bring about large-scale unemployment and cause very serious social problems, if it further evolves into a deep financial crisis and a national credit crisis, it will eventually develop into an economic crisis.