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The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) provides a better way to find out if there is a recession is taking place.This committee determines the amount of business activity in the economy by looking at things like employment, industrial production, real income and wholesale-retail sales.The difference between the two terms is not very well understood for one simple reason: There is not a universally agreed upon definition.
They define a recession as the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out.
When the business activity starts to rise again it is called an expansionary period.
So how can we tell the difference between a recession and a depression?
A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP.
A depression is any economic downturn where real GDP declines by more than 10 percent.
A recession is an economic downturn that is less severe.They also felt, by a lopsided margin, that if there were another depression (and fears of one were mounting), the government should repeat the spending pattern FDR had followed before.Not only did two-in-three favor the new Social Security program, but also even larger majorities favored the feds providing free medical care for the poor, spending to control venereal diseases, and new loans on easy terms so tenant farmers could buy the farms they rented. The WPA, employer of some eight million workers over its lifetime, was a favorite target.By this definition, the average recession lasts about a year.Before the Great Depression of the 1930s, any downturn in economic activity was referred to as a depression.Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition. They're unhappy with their economic prospects, convinced the country is headed in the wrong direction, upset with the federal government, and equally annoyed at Congress. After the worst economic downturn since the Depression, who wouldn't be this gloomy? According to a trove of early Gallup surveys compiled by the Roper Center, Americans in the 1930s were not nearly as down on government as we are today.The relative optimism of 1930s Americans was undergirded by what today would be regarded as "socialistic" tendencies.Even if only a tiny fraction were ready to describe themselves politically as "socialist," those surveyed after the 1936 election said they supported Roosevelt, architect of the New Deal's expansive programs, over his GOP opponent, Alfred Landon, by more than two-to-one.But 46% had no telephone, 43% lacked a car, and 38% still preferred the old black-and-white movie variety to color.Perhaps more relevant are some striking differences in economic outlook and preference.