Economic Depression Definition, An Economic Depression Suggests A Very Serious Recession

An economic depression is a severe economic recession that lasts several years. The US economy, luckily, has not experienced a depression since the great depression of 1929 which lasted ten years. An economic depression can badly affect a community, a region, a nation, or the world. Economic depressions and serious recession are often defined by several characteristics.

Massive unemployment like, during a great depression, most of the businesses suffer a large loss of sales for their product or service. For that reason a number of businesses often reduce their labour force by large amounts. Most of the businesses can go bankrupt during a serious economic depression, eliminating many jobs that were provided with the business. Social degradation like serious economic depression is often very bad for a functioning the entire society. With large rates of unemployment, many people can not get jobs. This way crime, food lines, prostitution, mass movements of people to various places, and other forms of social degradation are often common. Most of the people are forced to rely upon the legislation for help in these distressing times.

Degradation in social services like most of the people use government services of one form or another during normal economic patterns. Sometimes during affluent times in economy, individuals who are not currently employed can rely upon government assistance programs until they can find another job. During economic depressions, however, large portions of society may become unemployed and then, social services provided by the governing body can be put under sever pressure. As many people depend upon social services for employment needs, the ability of government to provide those services also becomes much more difficult. This condition is due to a drop in tax revenues provided by now existing businesses, as well as the employees of the government. As some one can notice, sever economic depression is not good for anybody.

During the economic depression, unemployment was 25% and wages for those people who still had jobs, fell 42%. Total output of US economic fell from $103 to $55 billion and world trade plummeted 65% as measured in dollars. The economic depression was aggravated by poor monetary policy. Instead of providing money into the economy, and increasing the money supply, the Fed allowed the money supply to fall 30%. The New Deal produced many government programs to end the Depression, but government programs alone could not end it. Unemployment to the country remained in the double-digits until 1941, when the US entry into World War II created defense-related jobs.

An Economic Depression on the scale of that in 1929 could not happen exactly the way it did before. Most of the laws and legislative agencies were put in place because of The Great Depression with the express purpose of preventing that type of cataclysmic economic pain. Central banks are very much aware of the importance of monetary policy in regulating the world economy. There is only so much monetary plan can do without fiscal stimulus. The incredible amount of the national debt limits government spending that could be used to stimulate the world economy.

• Emma Bullock
• 23/02/2009, 12:59 PM
• 0 Comments