Science Fair Project Encyclopedia
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, the start of a depression is characterized by increases in unemployment, restriction of credit, reduced 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 that could be produced (potential output) and the ability to purchase them. One could say that while a recession refers to the economy "falling down," a depression is a matter of "not being able to get up."
Today many economists believe that the combination of the social safety net and a much better understanding of macroeconomics makes another depression highly unlikely.
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