RECESSION AND DEPRESSION 2
Recession and Depression
There are many influences that affect business environments today. Periods of
economic downfall have severe repercussions on the economy. The government, businesses,
and individuals play key roles in production and distribution of goods and services; therefore,
challenges that disrupt the cycle lead to undesirable imbalances between demand and supply.
Terms like depression and recession explain business cycles and their influences on spending
habits for specific periods of time. Companies should invest in understanding the impacts and
consequences of recession and depression, to improve their ability to respond to the changes.
The term recession describes an economic downfall whereby activity dramatically
reduces. During a recession, the Gross Domestic Product and income figures significantly
mitigate for an undefined period. Symptoms of an economic recession include reduced
employment rates, reduced production and distribution of products and services in industries.
A more accurate description of recession indicates periods in a business cycle involving
extended troughs with economic activity declining for up to 18 months. During a recession,
capitalist structures usually increase the supply of money to the general population. Through
reducing interest rates, governments attempt to improve economic activity.
Since business cycles can be described through troughs and peaks, the term
depression indicates a more severe state of decline in economic activity characterized by a
period extending beyond one business cycle. Depression describes a period whereby national
economies are unable to recover from the decline in economic activity. During a depression,
the purchasing power of goods and services fall short of the ability to produce the value. It
explores a sustained period of economic crisis. The last depression witnessed in the United
States was in the 1930’s.
One of the main differences between a depression and a recession is about GDP
figures. A recession is usually indicated by a period lasting about two-quarters of GDP