Depression (also known as trough) is an economics term referring to the stage of business cycle in which a regional or world economy operates at its lowest level. Depression is one of the four stages of a business cycle. It is preceded by recession stage and succeeded by recovery stage.
Depression is characterized by low trade and commerce, high rate of unemployment, decline in real GDP, low incomes and investment, sovereign debt defaults, reduced credit availability, bankruptcies including bank failures. In some depressions, price deflation may also be observed.
There are no well-defined boundaries of depression in time. Some economists consider depression simply an extreme form of recession. However, in context of business cycle, these are two different stages. Recession morphs into depression and depression then morphs into expansion (or recovery) stage. In some cases, depression is limited to a region and in other cases it occurs worldwide.
Notable examples of economic depression are the Great Depression (1929-1930) and the Long Depression (1876-1896) (formerly known as the Great Depression)
There have been numerous other economic depressions which were either small in magnitude or were limited to few nations. For example, Soviet Russia was hit by very severe depression in 1990s. 2010s depression in Greece is one of the most recent examples.
by Irfanullah Jan, ACCA and last modified on