Depression versus recession
In economics, both recession and depression can be described in the simplest manner as significant slowdown in economic activity spread across a particular economy. Essentially, depression can be described as a severe form of recession in which there is a sustained decline in one or more national economies. Recession is seen as a usual downturn in business cycle which occurs more frequent than depression.
Recession begins moment after the economy has reached peak and last for a few months. It’s normally characterized by decline in the indicators of economic activities such as employment, investment, GDP, and industrial production.
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During recession, an economy normally experiences relatively high unemployment rate. It’s worthwhile to point out the various categories of unemployment put forth by both classical and Keynesian economist; these include cyclical unemployment, frictional unemployment, structural unemployment and classical unemployment.
Unrelenting unemployment level has an adverse effect on the ensuing long-run economic growth since it not only a waste of resources, but also drives people into poverty and brings about social conflicts (Romer, 1993, p.25).
Jahoda, M. (1988). Economic recession and mental health: Some conceptual issues. Journal of Social Issues, 44(4), 13-23.