Difference Between Great Recession and Great Depression

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Great Recession vs Great Depression (wallstreetmojo.com)

What is the Great Recession?

The Great Recession refers to the economic slump witnessed during the period from 2007 to 2009. It is considered to be the worst economic downturn since the Great Depression. The Great Recession was triggered by the bursting of the US housing bubble during 2005–2006, followed by the global financial crisis that continued till 2009. The phase from 2007 to 2008 is popularly known as the subprime mortgage crisis. According to the US National Bureau of Economic Research, the Great Recession started in December 2007, and it lasted till June 2009, which means that the economic downturn continued for nineteen months.

Key Takeaways

  • Great Recession occurred during the period from 2007 to 2009 and resulted from the US housing bubble caused by the subprime mortgageSubprime MortgageA subprime mortgage is a loan against property offered to borrowers with a weak or no credit history. Since the risk of recovering is high, the interest rate charged on such mortgages is higher so that the lender can recover a maximum amount at the beginning of the loan.read more crisis. However, the Great Depression took place in the US during 1929 and 1930 and began with a big fall in stock indices (Black Tuesday)In terms of length and depth, the Great Depression was far worse and had a long-lasting impact than the Great Recession. The Great Recession span was around 19 months, and the US economy contracted by ~4%. On the other hand, the impact of the Great Depression was felt for almost a decade and the US economy contracted by ~30%.The Fed’s response to both the events was one of the factors that resulted in two significantly different outcomes. In 1929, the Fed’s decision slowed down economic activities in the US, while in 2008, the Fed provided a monetary stimulus to revive the economy.The Fed learned from their mistakes committed during the Great Depression, which helped them overcome the Great Recession’s aftermath in a much better way.

What is the Great Depression?

The Great Depression refers to the severe global economic downturn in the US in 1929 and continued during the 1930s. It is considered the longest and the deepest economic downturn of the 20th century that swept almost the entire globe. The Great Depression began with the major fall in stock prices in the US on 4th September 1929 and again on 29th October 1929, known as the Black TuesdayBlack TuesdayBlack Tuesday refers to October 29,1929, when many investors panicked and started selling their shares. The trading volume went upto 16 million and Dow Jones dropped by more than 12% in a single day.read more. Although the recovery started in 1933 in most countries worldwide, many economic historians believe that the Great Depression finally got over with the beginning of World War II as the government spending on the war boosted the recovery process.

Infographics

Reading time: 90 seconds

Comparative Table – Great Recession vs Great Depression

Similarities Between the Great Recession and the Great Depression

Although the two economic events have some marked differences, there are some fundamental similarities:

  • Both the events followed periods of excellent economic growth.They resulted in huge economic downturns, and thus they are considered the two greatest economic disasters experienced in the US in the last one hundred years.Both the events were followed by the government’s massive involvement in the economic alleviation and ushering in several policies and regulations.

This has been a guide to the Great Recession vs Great Depression. Here we discuss the top similarities and differences between the two along with infographics. You may also have a look at the following useful articles –

  • Price EfficiencyGlobal RecessionEconomic RecessionBusiness Cycle