RECESSION V/S DEPRESSION

RECESSION

Recession is a significant decline in activity across the economy, lasting longer than a few
months. It is visible in industrial production, employment, real income and wholesale-retail
trade. The technical indicator of a recession is two consecutive quarters of
negative economic growth as measured by a country's gross domestic product
(GDP); although the National Bureau of Economic Research (NBER) does not necessarily need
to see this occur to call a recession.

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis
events can often trigger the onset of a recession. The global recession of 2008-2009 brought a
great amount of attention to the risky investment strategies used by many large financial
institutions, along with the truly global nature of the financial system. As a result of such a
wide-spread global recession, the economies of virtually all the world's developed and
developing nations suffered extreme set-backs and numerous government policies were
implemented to help prevent a similar future financial crisis.

A recession generally lasts from six to 18 months, and interest rates usually fall in during these
months to stimulate the economy by offering cheap rates at which to borrow money.

DEPRESSION

Depression is a severe and prolonged downturn in economic activity. In economics, a

depression is commonly defined as an extreme recession that lasts two or more years. A
depression is characterized by economic factors such as substantial increases in
unemployment, a drop in available credit, diminishing output, bankruptcies and sovereign
debt defaults, reduced trade and commerce, and sustained volatility in currency values. In
times of depression, consumer confidence and investments decrease, causing the economy to
shut down.

A depression is a sustained and severe recession. Where a recession is a normal part of the
business cycle, lasting for a period of months, a depression is an extreme fall in economic
activity lasting for a number of years. Economists disagree on the duration of depressions;
some economists believe a depression encompasses only the period plagued by declining
economic activity. Other economists, however, argue that the depression continues up until
the point that most economic activity has returned to normal.
The Great Depression began shortly after the Oct. 24, 1929, U.S. stock market crash known as Black Thursday. The stock market bubble had burst
and a huge sell-off began, with a record 12.9 million shares traded. The United States was already in a recession, and the following Tuesday, on Oct.
29, 1929, the DJIA fell 12% in another mass sell-off, triggering the start of the Great Depression.

Many investors' portfolios became completely worthless. Although the Great Depression began in the United States, the economic impact was felt
worldwide for more than a decade. The Great Depression was characterized by a drop in consumer spending and investment, and by catastrophic
unemployment, poverty, hunger and political unrest. In the U.S., unemployment climbed to nearly 25% in 1933, remaining in the double-digits until
1941, when it finally receded to 9.66%.

Shortly after Franklin D. Roosevelt was elected President in 1932, the Federal Deposit Insurance Corporation (FDIC) was created to protect
depositors' accounts. In addition, the Securities and Exchange Commission (SEC) was formed to regulate the U.S. stock markets.