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    Economic depression and inflation

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    What is the difference between economic depression and inflation? Describe the nature of an appropriate fiscal and monetary policy in each of these situations.

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    A depression is a recession (decline in GDP / real output for 2 or more quarters) that lasts longer and has a larger decline in business activity. On the other hand inflation is a general rise in prices across the economy.
    Thus a depression is characterized by a negative average real output growth rate while during inflation there is a rise in price levels in the economy.
    Fiscal and monetary policy in ...

    Solution Summary

    The difference between economic depression and inflation and appropriate fiscal and monetary policy in each of these situations are discussed.

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