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You may have heard the words recession and depression being tossed around in conversation before, only to realize you aren’t totally sure what really is the difference between these two words!
Ready to learn to distinguish between the two? Well, you’ve come to the right place.
- A Recession refers to a period of temporary economic decline(in the form of decreasing real GDP) throughout two consecutive quarters.
- A Depression, on the other hand, is a sustained, long term decline of real GDP. You may even call it a severe recession.
The main difference between a recession and a depression is time.
- An economy can achieve recession through a normal business cycle, for it requires only two consecutive quarters of GDP decline.
- However, depressions occur for a much longer period of time and have even more dire consequences for the economy than do recessions.
Here is a quote that sums up the difference:
“When your neighbor loses their job, it’s a recession.😧
When you lose your job, that’s a depression!”😨