What is the difference between a recession and a depression?

A recession is a widespread economic decline that typically lasts between two and 18 months. A depression is a more severe downturn that lasts for years. The most famous depression in U.S. history was the Great Depression. It lasted a decade.

What if a recession morphed into a longer-term depression?

If that occurred it could see a short, sharp recession morph into a longer-term depression. The main risk of this happening is one of the same factors that made the Great Depression so severe — debt. Back in the 1920s, in the lead-up to the Depression, Australia's problem was public debt.

Are recessions a normal part of the economic cycle?

Recessions are a normal part of the economic cycle. In fact, there have been 13 recessions since World War II. What Is a Depression? While people often worry about economic depressions, they are much rarer than recessions.

What is the difference between recession and expansion?

Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades. While there is also no standard definition for depression, it is commonly defined as a more severe version of a recession. In his popular intermediate macroeconomics textbook, Gregory Mankiw (Mankiw 2003) distinguishes between the two: