Definition & Meaning:

It is called either an 'economic depression' or just a 'depression'. This is a period of economic downturn where the size of a country's economy (measured by 'Gross Domestic Product (GDP)') decreases continually for at least 2 consecutive years (8 quarters).

It's basically a very long-lasting and severe 'recession'. Like with economic downturns or recessions, the reason why depressions happen varies. But the one thing they all have in common is a lack of confidence in the economy. As a result, both people and businesses invest and spend less. This causes business profits and income to fall, which then results in business bankruptcies and a rise in the unemployment rate, which causes even less investment and spending. It becomes a vicious cycle.

When a depression ends and an economy starts to grow in size (called 'economic expansion') again, this is called a period of 'economic recovery'.

Example:

Economic depressions are fortunately not very common for most countries. The last global one (called 'the Great Depression') happened after the Wall Street crash in 1929 and lasted between then and 1933. But it had severe impacts on the economies of many countries until the end of the decade.

Pronunciation:

Click to hear economic depression

Related Vocabulary:

GDP, Recession, Economic Downturn, Inflation.

Exercises:

To learn more vocabulary connected to economics, you can do a free online exercise on describing how the economy is performing.