What is depression in economics?

depression, in economics, a major downturn in the business cycle characterized by sharp and sustained declines in economic activity; high rates of unemployment, poverty, and homelessness; increased rates of personal and business bankruptcy; massive declines in stock markets; and great reductions in international trade and capital movements.

What causes economic depression?

When consumers stop buying products and paying for services, companies need to make budget cuts, including employing fewer workers. But let us look more deeply into other factors that lead to economic depression. 1. Stock market crash The stock market is composed of stocks that investors own in public companies.

What are the signs of an economic depression?

High unemployment rates, devaluation of assets, increasing debt defaults and rising inflation are common signs of an economic depression. During the Great Depression, unemployment rates increased by over 25%, and the real GDP plummeted by 29%. An economic depression may share some characteristics with a recession.