Depression for business and financial world is a kind of the prolonged financial difficulties or recession. The decrease of the economic activity causes declining of the production and employment levels. In the business world, the recession that lasts for more than two quarters turns to be a depression.
The main peculiarities of the depressions are:
- Long duration.
- High rates of unemployment.
- Inaccessibility of credits.
- Abnormal financial crisis in banks.
- Reduction of production because of the insolvency of the purchasers and bankruptcy of the investors and producers.
- A huge number of the default, bankruptcies, crises.
- The cutback of the trade and commerce, especially on the international level.
- Significant instability of the currency value fluctuations.
The National Bureau of Economic Research tends not to mark difficult periods in the economics of the country as depression. It prefers to determinate contractions and expansions in the business cycle rather than calling it a depression.
The main two indicators of the depression are:
- The recession of the duration 2 and more years.
- The decrease in real GDP exceeding 10%.
One of the most significant and difficult depressions happened in the USA started in 1929. According to particular resources, it lasted for 10 years, according to other sources – for 4 years. Such a big discrepancy appears because the experts based their research on the different definitions of the depression.