What is the term 'depression' typically used to define?

The term 'depression' is typically used to define a severe recession characterized by a prolonged period of negative economic activity. During a depression, economic output contracts significantly, leading to high unemployment rates, a substantial decline in consumer spending and investment, and widespread business failures. This situation is much more serious than a standard recession, which is generally shorter and less severe.

In the context of economic terminology, depression signifies deep and enduring distress in the economy, as opposed to minor downturns or business cycles that might be better described as recessions. It reflects not just a drop in economic growth but a fundamental breakdown in economic structures that can lead to lasting damage to the economy's overall health. Understanding this distinction helps in recognizing the severity and potential long-term impacts of economic conditions on society and markets.