RECESSION ? DEPRESSION ? WHAT'S DIFFERENCE ?

                  Although people often use the terms recession and depression interchangeably in casual conversation, the two are not the same.

RECESSION:

      In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

DEPRESSION:

depression, in economics, period of economic crisis in commerce, finance, and industry, characterized by falling prices, restriction of credit, low output and investment, numerous bankruptcies, and a high level of unemployment


There is an old joke among economists that states: A recession is when your neighbor loses his job. A depression is when you lose your job

DIFFERENCE:

So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.
                                                                       Recession mark a downward swing in the curve of the business cycle and are caused by a disequilibrium between the quantity of goods produced and the consumers' ability to purchase. If a recession continues long enough, it can turn into a depression. Neither term has ever been distinctly defined by a set of criteria, however, so it is difficult to say at what point the two merge. A short period in which fear takes hold of companies and investors is more properly called a panic and does not necessarily occur in every depression, but lack of confidence in business is always present in an economic downturn
                                                                      
                                
recession and depression both means a slowdown in economic activity. Generally recession can be taken as a far less severe form of depression.


A widely accepted indicator of recession is, decline in GDP for two successive quarters . That is if the Gross Domestic Product of an economy declines continuously for six months, the economy is in recession. Although there is no widely-agreed-upon definition for a depression, generally a depression is distinguished from recession when GDP declines by more than 10 percent. Another yardstick for depression is a recession lasting 3 or more years.


Recession occurs more frequently than depression. Deciding whether the economy is in recession or depression is a matter of perspective.

Summary:

1. Recession is a less severe form of economic downturn.
2. Recession occurs more frequently than depression.
3. When the GDP declines by more than 10% and lasts longer than 3 years, its called depression.

SUBMITTED TO=MR. GURDEEPAK SINGH

 SUBMITTED BY=RITU SIAN

M.B.A=1

SECTION=B