DEPRESSION

Though depression has visited the world economy only once in 1929, economists have pin-pointed enough number of traits to recognise it. The major traits of depression could be as given below:

(i) an extremely low aggregate demand in the economy causes activities to decelerate;

(ii) the inflation being comparatively lower;

(iii) the employment avenues start shrinking forcing unemployment rate to grow fast;

(iv) to keep the business going, production houses go for forced labour-cuts or retrenchment (to cut down production cost and be competitive in the market,) etc.

The economic situations become so chaotic in the phase of depression that governments have almost no control over the economy. The Great Depression of 192976 gave rise to the ideas of strong government intervention77 in the economy, such as deficit financing, monetary management, etc.‌

What the governments may do if depression visits the economy? The simple answer the world has been able to find is to repeat the policy measures of 1929. The best way to avoid depression is not to let it visit. This is why every modern economy keeps extra-vigil on the major symptoms of its economy so that the prevention-measures can be taken in time and depression is avoided.