Causes of economic recession and depression and how they are different

The concepts of economic recession and depression have attracted varied opinions among economists and the general populace. Whereas a recession is explained in respect to business cycles, a depression is defined in relation to a recession. In this respect, business cycles are postulated to undergo periods of peaks (increased activity) and troughs (decreased activity). When the periods of troughs last more than a few months, thus leading to the effects of reduced activity being evident on economic indicators such as employment, production, real income, and retail prices, a recession is argued to have occurred. On the other hand, where such periods of low activity persist for extended periods leading to more severe effects on economic indicators, a depression is argued to have occurred.  In history, whereas recessions have occurred periodically, depressions such as the 1930s Great Depression have been rare.

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