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Recession versus Depression

For use with Talking Point worksheets

Moderator: TalkingPoint

Recession versus Depression

Postby TalkingPoint » Thu Apr 23, 2009 8:10 am

What is a recession?
There are various definitions of what a recession actually is. Dictionaries define it as an economic decline, which means that there is a reduction in a country’s industrial output and that the nation’s trade or GDP (Gross Domestic Product) decreases. Economists put a time limit on this, stating that the situation needs to continue for at least six months. However, some experts feel that this definition does not take enough data into account. For example, this assessment does not include information about changes in the unemployment rate, sales figures and consumer confidence.

What is a depression?
A depression is generally considered to be a long, sustained period of severe recession. The most famous depression started in 1929 in The United States of America on October 29th, when the stock market collapsed in the Wall Street Crash. This day came to be known as Black Tuesday. The Great Depression which followed had far-reaching consequences and sparked off depressions in many other countries around the world, affecting various business sectors, including industry, construction, farming, mining and the employment market in general. Global trade was crippled and individual nations struggled for years to rebuild their economies. The depression ended at different times in different countries – continuing until the 1940s and even the 50s in some places.

What’s the difference?
So, "When does a recession become a depression?" one might ask. It’s a good question and one that even experts such as economists and politicians have difficulty defining precisely. Nevertheless, it is generally accepted that a recession is when a country’s GDP shrinks by less than 10% - anything more than 10% is classed as a depression. However, if that definition seems too technical for you there is a rule of thumb by which you can decide for yourself whether there is a recession or a depression in your country:

A recession is when your neighbour loses his job - depression is when you lose yours!

Quick Quiz: Read the clues below and write the solutions on a piece of paper. Then take the first letter of each answer and rearrange them to find the hidden word connected with this Talking Point.

1. Some experts feel that this definition does not take enough data __________ account.

2. The American stock market collapsed in 1929 in the Wall Street __________.

3. The Great Depression had far-reaching consequences and __________ off depressions in many other countries.

4. Global trade was crippled and __________ nations struggled for years to rebuild their economies.

5. It is generally accepted that a recession is when a country’s GDP __________ by less than 10%.

6. There is a __________ of thumb by which you can decide for yourself whether there is a recession or a depression in your country.
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