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What distinguishes a recession from a depression?

February 2007 Excellent query. Sadly, despite the fact that economists frequently make fun of the distinction between the two, there is no standard response. However, let's return to that later.


Let's begin by discussing what a recession is. There are many ways to define a recession, as I mentioned earlier. Journalists frequently use, for instance, two consecutive quarters of declines in quarterly real (inflation-adjusted) GDP to define a recession. The definitions used by various economists vary. The National Bureau of Economic Research (NBER) has established monthly business cycle peaks and troughs that economists use to define expansion and contraction. The peak and trough of economic activity are listed on the NBER website, with the trough occurring in December 1854. Additionally, a recession can be referred to as: A recession is a prolonged period of significant economic activity across the economy, typically reflected in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession occurs when the economy is at its lowest point and its highest point. The economy is expanding from the bottom to the top. It is typical for the economy to grow; Recessions are rare and typically short-lived these days. Depression is also referred to as a more severe form of a recession, although there is no universal definition.

Gregory Mankiw distinguishes the two in his well-known textbook for intermediate macroeconomics (Mankiw, 2003): The most notable example of a decline in real GDP occurred at the beginning of the 1930s. Depressions are more severe periods, whereas mild recessions are referred to as recessions. Mankiw argued that the Great Depression, which was frequently portrayed as beginning in 1929 and lasting at least through the 1930s and early 1940s, was perhaps the most well-known economic downturn in American and global history. In fact, there were two severe downturns during the time. According to the NBER business cycle dates, the first Great Depression downturn began in August 1929 and lasted 43 months until March 1933, significantly longer than any other contraction of the 20th century. Between March 1933 and May 1937, the economy expanded for 21 months before experiencing yet another downturn: The economy contracted once more for 13 months from May 1937 to June 1938. Examining the annual growth rates of real GDP (in chained dollars) is a quick way to demonstrate the difference between the severity of the economic contractions associated with recessions from 1930 to 2006.

The NBER has identified recessions, which are represented by the grey bars. The Great Depression of the 1930s saw the two most severe contractions in output, with the exception of the adjustment that occurred after World War II from 1945 to 1947.

Is there any effect of the recession on the gold price?

Yes, when currency values fall due to inflation, the gold price typically rise. This means that gold moves in the opposite direction of market conditions, but not always. Gold may be as susceptible as the stock market if investors do not look for it. Again, this is because something's value is largely determined by how it is perceived in society and how popular it is. If everyone thought gold was worthless when they woke up tomorrow, the price would fall dramatically.


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