Recessions and depressions

Recessions and depressions are both economic downturns, but they differ in terms of severity. A recession is usually defined as a period of two consecutive quarters (six months) or more when the economy experiences decreasing real gross domestic product (GDP), increasing unemployment rates, and declines in industrial production. This typically lasts for less than one year. By comparison, a depression is an extended period of time—typically at least several years—wherein GDP falls significantly below its previous peak level with higher levels of unemployment and significant drops in consumer spending, business investment, corporate profits, housing prices etc., resulting from prolonged deflationary pressures on the market.

The most severe global recessions/depressions include: The Great Depression which lasted from 1929 to 1933; Japan’s Lost Decade during 1990-2000; Europe’s Great Recession beginning 2007-2009; and South America’s crisis starting 1998 – 2002. Each had different causes that were rooted within their respective economies such as oversupply leading to decreased demand or overly restrictive monetary policies preventing growth due to tight credit requirements among other factors

Governments have employed various policy measures like fiscal stimulus packages to combat recessions/depressions by stimulating aggregate demand through increased government expenditure on infrastructure projects & services or tax cuts for businesses & individuals These measures aim either directly towards labour markets e.g job creation schemes , training programmes etc or indirectly via financial incentives encouraging firms to invest into new capital assets . Nevertheless such interventions can come too late if not implemented quickly enough given how long it takes them pass through decision making processes , whilst further exacerbating problems caused by insufficient liquidity available within banking systems thus hampering access loan facilities needed by entrepreneurs necessary looking expand operations .

Ultimately governments need look carefully balance between ensuring macroeconomic stability maintaining reasonable interest rate environment so encourage lending activities despite potential inflationary effects this may cause ; allowing sufficient room manoeuvre enable effective implementation countercyclical policies should situation arise where some form intervention be required help soften blow any associated downturn .