Depression is a prolonged slowdown in economic activity that is more severe than a recession. In a recession, economic growth slows down for two consecutive quarters or two years. Meanwhile, the depression lasted for three years or more and real GDP fell by more than 10%. Economic depressions are rare. What happened in the United States was the Great Depression, which lasted for a decade. In the Great Depression, unemployment reached 25% and wages fell by 42%. Other possible consequences of depression include increased poverty, bankruptcy and default of many institutions, a decline in economic activity, famine, and defaults on many mortgages.

An economic depression is an extended and severe downturn in economic activity characterized by a significant decline in GDP, widespread unemployment, and a collapse in consumer and investor confidence. It typically lasts longer and is more severe than a recession, often marked by a contraction in industrial production, trade, and investment. Economic depressions are accompanied by deflationary pressures, where prices of goods and services fall, leading to further economic contraction. They are often caused by various factors such as financial crises, asset bubbles bursting, or systemic failures in the economy. Recoveries from depressions are slow and require significant government intervention and structural reforms.