Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Depression

What it is:

A depression is a sustained downturn in economic activity characterized by high unemployment, decreased output and reduced levels of trade. 

How it works (Example):

Low levels of consumer confidence during times of depression generally result in a severe drop in consumer demand and spending. This leads companies to cut costs by reducing their workforces, resulting in high unemployment and even lower consumer confidence and spending. Prices and wages spiral downward, causing more turmoil.

The Great Depression of the 1930s is the best example of the far-reaching economic and social impact a depression can have. 

Why it Matters:

A depression can have devastating social and economic effects. It is generally accepted that dramatic government intervention is required in order to move an economy from depression to recovery.

Related Terms View All
  • Vernon L. Smith
    Born in 1927 in Wichita, Kansas, Vernon L. Smith earned an engineering degree from Cal...
  • Weak Longs
    Weak longs tend to be traders, not investors. Short-term traders typically only own a...
  • Kamikaze Defense
    The kamikaze defense is named after the suicide tactics of Japanese pilots during World...
  • Tick Test Rules
    Also known as a minus tick, a downtick occurs when a security sells at a price less than...
  • Umbrella Personal Liability Policy
    Let' say John Doe owns a home and has homeowners insurance as his mortgage lender...