January 10th, 2018
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.