Economics play a very important role in the development of any country. The general economical condition of the people, indicate that total development. There are many national and international factors, which affect the economic conditions. Some terms are important in this regard like inflation, recession and great depression. They are commonly used in terms of economic conditions of any country; here we are discussing the differences between them.
When prices of goods and service increase on general level over a period of time, it is called as inflation. Inflation leads to the reduction in purchasing power of the people. People can buy fewer goods and services in the same amount of money, for which they were, use to get more. Excessive money supply leads to higher rates of inflation. Inflation has both negative and positive effects on the economy of any country.
When general economic activity of any country slows down, this condition is called as recession. It is a business cycle in which many changes occur, like rate of unemployment increase, GDP, household incomes and business profits all reduce. Macroeconomic policies are a good way to break the cycle of recession.
Great depression is remembered in the history of the world as the worst economic decline. It was started from United States in 1929. The main reason was crash of stock exchange but it rapidly engulfed almost all the countries of the world. It lasted for many years and took the world on the verge of economic destruction.
Inflation vs Recession vs Great depression
Inflation is the gradual increase in the prices of goods and services, while recession is the slowing down of economic activity. They both are different terms, yet closely related with each other. They both affect the life of a common man, as in case of recession rate of unemployment increase while inflation reduces the buying power of a common man. On the other hand, great depression is a sad economic incident in the history of the world, when whole world was facing the economic crisis.
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