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
  • Qualified Appraiser
    A qualified appraisal is a document that formally describes the value of a piece of...
  • Wallflower
    Usually used to describe individuals who are relegated to the sidelines in social events...
  • Telephone Booth
    When an investor wishes to buy or sell a security listed on the NYSE, she "places a trade...
  • Seasonality
    For example, the restaurant industry is somewhat seasonal. Sales for many companies are...
  • Minimum-Interest Rules
    Many companies and individuals make loans. These loans can occur in any amount and carry...