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The simple definition of a depression is a large scale recession that lasts an extended period of time. Some define a depression as a scenario where real GDP drops by over 10%. Another way to differentiate it from a recession is the period of time. Recessions are said to typically last one year while an economic depression lasts several years.

The term “depression” comes from the Great Depression of the 1930s. Before that event, any modest decline in economic activity was considered to be a depression. The term recession was then used to describe smaller economic downturns while the depression was used to describe major, longer lasting declines like the Great Depression.

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