How does a depression affect the economy?

Depressions cause severe financial damage, including stock market downturns, job losses, corporate and personal bankruptcies and even potential destabilization of the entire financial system. In the long term, a depression can cost an entire generation of people economic opportunities and hinder their education and economic mobility.

What is an economic depression?

An economic depression is a rolling disaster that begins with a decline in consumer confidence. There is, of course, a triggering event or events behind this loss of confidence. The subprime mortgage crisis of 2006 is seen as the first major event leading to the Great Recession of 2007-2009.

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.