Question

Explain the difference between a recession and a depression.

Answer 1

There is no standardized differences between recession and depression, but one can say recession is more mild form of economic contraction than the depression because during depression we witness more severe decline in real output. In other words, you can take an example of unemployment rate, if you say that during recesion unemployment rate is 8%, than one can assume that during depression unemployment may be around 15%.

You see sharp decline in GDP growth during depression say 10-15% but in recession the decline is much lower may be in range of 1-3% for developed economies. Recession is generally defined as economic contraction for two or more consecutive quarters while depression may be more longer in nature.

the above is answer..