What Is the Difference Between”Recession” and “depression” in Regards to Our Economic Climate at Present?

by Ed Yourdon

Question by Rabbit09: What is the difference between”Recession” and “depression” in regards to our economic climate at present?
Just wondering what the difference is with “depression” and “Recession”
in regards to today’s failing economy?

Best answer:

Answer by Quicken Loans
That’s a great question. At one time in our nation’s history (before the Great Depression of the 1930s), any downturn in the economy was referred to as a “depression.” But because of the severity of that particular depression, a new term was coined to indicate economic downturns that were less serious.

To measure economic downturns, most economic experts now look to the GDP (Gross Domestic Product – an indicator of a country’s economy that measure the value of the goods and services that country produces). If a country’s GDP declines by over 10%, then there is officially a depression. A recession is any downturn that is less extreme.

Using this measure, the Great Depression of the 1930s was actually two events: an extreme depression that occurred between 1929 and 1933, where real GDP declined by almost 33%, and then a period of recovery before the less severe depression of 1937-38 (where US GDP declined by over 18%).

The US hasn’t experienced any depressions since the ones we had in the 30s. The most intense downturn since the Great Depression was a recession in 1973-75, where real GDP fell by nearly 5%.

Because one must evaluate the past to determine the loss of GDP, no one can be sure yet what the extent of our current economic downturn will be. Some experts are saying that when all is said and done, we will have seen a decline of 5%, but we will only be able to see this clearly when the economy begins to grow again.

Add your own answer in the comments!

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