Depression (economics)

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In economics, a depression is a term commonly used for a sustained downturn in the economy. It is more severe than a recession (which is seen as a normal downturn in the business cycle). Like a recession, a depression is characterized by increases in unemployment, restriction of credit, reduced productive output and investment, price deflation, numerous bankruptcies, and reduced amounts of trade and commerce. Unlike a recession, there is no official definition for a depression, even though some have been proposed. Generally it is marked by a substantial and sustained disequilibrium between the quantity of goods produced and the consumers' ability to purchase them.

The most noted depression is the Great Depression that affected much of the world in the 1930s. Also notable is the Long Depression that lasted from the 1870s until the 1890s.

Today many economists believe that the combination of the social safety net and a much better understanding of economics makes another depression highly unlikely.