Depression – What is depression economics?

What is depression economics? Depression in economics is a stage of the business cycle in which an economy produces the lowest Gross domestic product. When there is depression in an economy, it always comes with high unemployment, declined real GDP, decreases in incomes and investment. There will be reduced credit availability and more bankruptcies including banks’ failures. Depression is an extreme form of recession.

There is no exact time limit for depression to last but economists consider that it normally lasts for more than 1 year then proceeded into an expansion which is also called the recovery stage.

Depression Example

Recessions can extract a tremendous toll on stock markets. Most major equity indexes around the world endured declines of over 50% in the 18-month period of the Great Recession, which was the worst global contraction since the 1930s Depression. Global equities also underwent a significant correction in the 2001 recession, with the Nasdaq Composite among the worst-hit: the index plunged by almost 80% from its 2001 peak to its 2002 low. Importantly, recessions due to credit bubbles bursting are far worse on income and consumption than from stock market speculative bubbles bursting.

Great Depression in Economics

The Great Depression was intense and reaching throughout the world economic depression that happened mostly during the 1930s, beginning in the US. The timing of the Great Depression was diverse across the world; in most of the countries, it felt in 1929 and lasted until the late 1930s. It was the most disturbing and most widespread depression of the 20th century. The Great Depression is an example of how intensely the global economy can decline or fall.

The Great Depression had distress on both developing and developed countries. Personal incomes, tax collections, business profits, and market prices dropped, while international trade fell by more than 50%. There was unemployment of around 23% in the United States. In some countries it was as high as 33%.

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