What describes a depression?

A depression is characterized as a long-lasting and severe economic slowdown. This condition extends beyond a typical recession, which, while also a downturn, is usually shorter in duration and less intense. During a depression, key economic indicators such as GDP, employment levels, and consumer spending can decline significantly for an extended period, often resulting in widespread business failures and high unemployment rates.

In contrast, a brief economic downturn refers to a recession, which does not capture the prolonged and severe nature of a depression. Rapid economic recovery signifies a return to growth, which is the opposite of what occurs in a depression. Finally, an increase in consumer spending and investment indicates economic expansion, not a decline, and therefore does not align with the definition of a depression. The defining factor of a depression is its persistence and severity, making the choice that describes it as a long-lasting and severe economic slowdown the correct one.